What Is a Grant Deed and How Does It Work?
What Is a Grant Deed and How Does It Work?
If you are transferring or acquiring title to real property, you need to understand the various types of deeds that may be used. This includes grant deeds, which are especially likely to be encountered if property is being acquired through a tax or foreclosure sale.
What Is a Deed?
A deed is a legal document transferring title to real property from one party to another. The party can be an individual, a business entity (such as a corporation or LLC), a trust, or an estate. The party transferring title is called the grantor, or the transferor, while the party receiving title is called the grantee, or transferee.
There are two basic types of deeds: quitclaim deeds and warranty deeds.
Quitclaim deeds. With this type of deed, the grantee does not guarantee that the grantor actually has an interest in the property. If it turns out that the grantor does not have title to the property, or there are any problems with the title, the grantee has no legal recourse against the grantor.
Warranty deeds. With a warranty deed, which includes a grant deed, the grantor gives the grantee one or more legally enforceable assurances, or warranties, regarding the title to the property. There are two categories of warranty deeds:
- General warranty deed. This type of warranty deed guarantees that there are no undisclosed title problems with the property, even relating to the time before the grantor acquired the property. It also requires the grantor to pay any legal costs that may be incurred if a title problem arises. In essence, the grantor is saying, “I promise there are absolutely no undisclosed title problems, and I will pay to defend the title in court." A general warranty deed gives the grantee the most possible protection.
- Grant deed. A grant deed, also known in many states as a limited warranty deed or a special warranty deed, gives the grantee some, but not all, of the assurances of a general warranty deed. The typical grant deed only makes two warranties: that the grantor has not transferred the property to anyone else and that there are no title problems that arose during the time the grantor has held title. It gives no warranties as to any claims that may have arisen before the grantor acquired title and makes no promise to pay legal costs of defending any title claims.
A warranty deed, including a grant deed, may include exceptions for certain encumbrances on the property, such as a mortgage, easements, property taxes owed, and other matters such as subdivision deed restrictions. If any such exceptions are stated in the deed, they are not subject to the warranties.
Uses of Deeds
The type of deed used depends upon both the relationship between the grantor and grantee and the nature of the property transfer.
Quitclaim deeds. Quitclaim deeds are mostly used in transfers between family members, into or out of the grantor's trust or business, or to correct an error in a warranty deed.
General warranty deeds. These are typically used where the grantor and grantee are strangers and money is changing hands. A general warranty deed will almost always be required when the buyer is obtaining a mortgage to finance the purchase.
Grant deeds. A grant deed is most commonly seen when the grantee is acquiring title in a tax or foreclosure sale.
A grantor would ideally prefer to give a quitclaim deed because it frees them of liability for any title problems. On the other hand, the grantee is best protected by a general warranty deed. A grant deed can be viewed as a middle ground, offering the grantee a degree of protection somewhere between a quitclaim and general warranty deed.
Content of a Grant Deed
Any deed will contain the date, names of the grantor and grantee, a description of the property being transferred, and the signature of the grantor. There are also typically signatures of witnesses or a notary public acknowledgment, as required by state law.
A grant deed will also include a statement as to what warranties are included. For example, a typical grant deed warranty statement is: "The Grantor warranties that the Grantor is lawfully seized in fee simple of said property, and that said property is free and clear from all liens and encumbrances incurred during the period of the Grantor's ownership, except as herein set forth, and except for taxes due for the current and subsequent years, and except for any restrictions or easements of record."
In some states, the nature of the warranties may be implied by the title of the deed, without the necessity of stating them in the deed itself. For example, if the deed is titled “Grant Deed," the warranties provided in the state law automatically apply.
The exact content, format, and execution requirements for deeds are also a matter of state law. Therefore, you need to be sure to comply with the requirements of the state where the property is located.
Basically, if you are the one acquiring title, a grant deed is preferable to a quitclaim deed but not as good as a general warranty deed. Regardless of what type of deed is used, it is advisable to obtain title insurance to be as fully protected as possible.