Warranty Deed: Understanding the Significance in Real Estate

When it comes to real estate transactions, understanding the legal paperwork and processes can be challenging for many individuals. Among the documents you may encounter is something known as a ‘Warranty Deed.’ 

For those navigating the property market, be they first-time buyers or seasoned investors, an understanding of what the document is and its role in property transactions is essential. In this article, we unpack the concept of this document, its significance, and the assurances it provides to property buyers.

What is a Warranty Deed?

At the heart of any real estate transaction is the transfer of property ownership. A warranty deed is a legal document used in real estate transactions to do just that. It transfers the property title from the seller (the grantor) to the buyer (the grantee). It is a critical instrument as it not only signifies the transfer but also provides certain guarantees about the property’s title.

Guarantees Provided by the Document

Unlike a quitclaim deed that only transfers any ownership interest the grantor may have in the property without any guarantees, a warranty deed provides the buyer with more assurance. A warranty deed includes several legally binding covenants or guarantees about the property’s title, which protects the buyer against future claims on the property. These covenants typically include the following. 

• Covenant of Seisin: This covenant ensures that the seller owns the property and has the legal right to sell it.
• Covenant Against Encumbrances: It guarantees that the property is free from any liens or encumbrances, except those specifically listed in the deed.
• Covenant of Quiet Enjoyment: This covenant assures that the buyer’s ownership of the property will not be disturbed by anyone with a better claim to the title.
• Covenant of Warranty Forever: The seller will protect the buyer against any future claims to the property.
• Covenant of Further Assurance: The seller will do whatever is necessary in the future to perfect the title if it’s found to be imperfect.

These guarantees ensure that the buyer is not blindsided by any unknown claims or legal complications concerning the property in the future.

The Importance of a Warranty Deed

These legal documents play a significant role in real estate transactions as they provide protection to buyers. With the assurances provided by the warranty deed, buyers can invest in a property. Furthermore, most mortgage lenders require this document before they approve a loan for the property purchase.

General vs. Special

It’s also worth noting that there are two types of this form of legal document.

A general warranty deed provides the broadest form of protection to the buyer. It covers the property’s entire history, including any claims or encumbrances that might arise from before the seller owned the property. The covenants mentioned earlier usually apply to the general version of the deed.

On the other hand, a special warranty deed only covers the period that the seller owned the property. This means it guarantees against only the claims or encumbrances that occurred during the seller’s period of ownership, not before.

The Role of Title Insurance

While a warranty deed provides guarantees about the title, it’s not a substitute for title insurance. Title insurance protects the buyer and the mortgage lender from financial loss due to defects in the title. This includes liens, ownership disputes, and other issues not discovered during the title search. A warranty deed ensures that the seller will defend the title against claims. In contrast, title insurance compensates for any financial loss due to title defects.

So, What Is a Warranty Deed in Real Estate?

In conclusion, a warranty deed is a fundamental aspect of real estate transactions. It not only facilitates the transfer of ownership but also provides certain protections to the buyer. Knowing the importance of this type of deed, its guarantees, and how it differs can provide property buyers with peace of mind. 

As with all legal documents, we advise buyers to consult with a real estate attorney or a professional to ensure they fully understand the terms of the warranty deed before signing.