What Is a Warranty Deed? Types and Uses

With any real estate transaction, whether you're buying or selling a house, you want to be able to provide or secure a warranty deed. This legal document transfers ownership of the property and offers a buyer the greatest amount of protection and assurance. 

With a warranty deed, a seller guarantees that “there are no problems” with the property ownership, and they are authorized to make the sale. For a buyer, a warranty deed gives them the comfort that the property they’re acquiring has no issues like missing titles or outstanding liens. 

Here’s more information on different types of deeds, why they are necessary, and how to get one.

What is a warranty deed? Definition

A warranty deed is a legal document that transfers property ownership from the seller or “grantor” to the buyer or “grantee.” A warranty deed protects the buyer from financial or legal issues surrounding ownership of the property. 

A warranty deed: 

• Is a legal document that transfers property ownership from a seller to a buyer
• Assures that titles to property are clear of any encumbrances or legal issues
• Shows the seller is the rightful owner and can transfer the title
• Guarantees that there are no outstanding claims or legal entanglements 

A warranty deed is akin to a seven-star rating in real estate transactions because it offers the highest level of security and protection against financial and title claims. 

How do warranty deeds work? 

A warranty deed is commonly used in a real estate transaction when the new owner wants legal clearance that property purchased is free from pending financial and legal issues. Financial institutions often ask for a warranty deed before approving a home loan or mortgage. 

Here’s a breakdown of how warranty deeds work. 

Provide guarantee of clear title

When a seller signs a warranty deed, they are saying that they can guarantee there are no claims of ownership to this property. They are passing on a clean title that will withstand potential claims by any third party. 

Serve as protection against future claims

A warranty deed goes a step further and protects the buyer from any future ownership claims. For instance, if you receive a warranty deed for your home but get a knock on the door six months later from a third party claiming ownership, you can hold the previous owner liable for this mishap. The grantor has to defend your ownership and compensate you for any losses. 

Prove ownership

The warranty deed also shows that the grantor is the current owner and thus has the legal right to sell the property and transfer the title. The deed guarantees that nobody is owed money for the property.

One thing to note is that many buyers assume that getting a warranty deed means they own the property. That’s not true. To claim official homeownership, the seller must transfer the title in your name  and the deed must be recorded. 

Types of warranty deeds 

Deeds come in different forms, each with varying power, protection, and purpose.  

General warranty deed

In real estate, a general warranty deed is the "deed of all deeds.” The general deed (aka “warranty deed”) covers the entire ownership history and protects buyers from any third-party claims around liens and titles. So even if there are pending homeowners association fines from several owners ago, the new owner won't be liable for those. A general warranty deed is extremely popular in real estate transactions where buyers don’t want any risk with their purchase. 

On the other hand, a general warranty deed places a lot of responsibility on the grantor’s shoulders. They could be held liable for title defects or claims they aren’t even aware of.

Special warranty deed

A special warranty deed, also called a limited warranty deed, offers a lower tier of protection and is commonly used for commercial real estate and foreclosure purposes. With special warranty deeds, the legal owner only ensures that the property is free from outstanding liens and claims during their ownership and that they have the right to transfer ownership. It is possible that someone created a defective title before their ownership.  

Suppose you buy a manufacturing facility with a special warranty deed. The seller owned the place from 2018 to 2024. You set up your business and get a notice from a former owner claiming they have rights to the place since 2015. With a special warranty deed, you are on your own to resolve this title defect. 

Statutory warranty deed 

A statutory warranty deed is similar to a general warranty deed in the sense that it provides transfer of ownership. But, it only provides protection as per the state statutes, so it can be more limiting than general warranty deeds. Statutory warranty deeds must follow their state’s pre-approved deed format. 

Other deeds 

• Grant deed. A form of deed that provides limited protection to the buyer. Through a grant deed, the seller confirms that they have not transferred ownership rights to anyone else and that no title claims were made while they owned the property.
• Quitclaim deed. Quitclaim deeds are the fastest way to gain property ownership and are used in situations where you inherit property without a sale, like via an inheritance or divorce. The deed provides no buyer protection as the seller makes no promises about the property title.  
• Special purpose deed. A representative or entity acting in an official capacity can transfer property without incurring personal liability. Special purpose deeds are frequent in gift-giving, trust administration, and court proceedings. 

Warranty deeds: Pros and cons

A warranty deed offers the first line of defense against title claims, but it's not the end-all and be-all of protection and security.

Pros 

For buyers, it offers:

• The strongest protection against past title defects and liens. 
• Peace of mind that a purchase is secure, and the seller is there to resolve any ownership disputes. 
• Access to financing because lenders are more likely to approve loans to clear titles. 

For sellers, a warranty deed enhances the property’s marketability, potentially fetching them a higher sale price and increased profitability.

Cons

Buyers must understand that,

• The power and protection of each deed differs, and you have to be mindful of what you’re signing.
• Deeds can be expensive depending on the type of deed, state, and value of the transaction.
• Deeds don’t replace or supersede title insurance.

A warranty deed can present a challenge for sellers. It increases their liabilities, as they might be on the hook for resolving any title issues that arise, even if they didn't know about them when they made the sale. It can also delay their sale because sellers must perform a detailed title search before signing the deed.

How to get a warranty deed

A warranty deed can give you the utmost confidence before closing on your dream home. Here’s how to acquire it for property transfers.

Key steps 

Follow these steps to get a warranty deed.  

• Perform a title search. The process kicks off by hiring a title company to run a detailed title search on previous and current ownership records to identify liens or issues affecting the title. 
• Create a deed. The warranty deed generally includes details such as the property’s address, legal description, a statement of intent, the transaction date, amount being paid, and the names and contact information of the parties involved. 
• Record the deed. In order to be legally binding, the warranty deed needs to be signed and notarized as per state laws. It must then be filed with the county clerk's office for recording purposes. The deed is delivered to the grantee at the closing of the transaction. 

Legal requirements

A warranty deed, once signed and notarized, is a legally binding document. You want to make sure it meets the legal requirements, especially if you seek a statutory warranty deed. Generally, a warranty deed will include the following details: 

• property address and description
• statement of intent for property transfer from seller to buyer
• statement that the grantor owns the property and has the legal right to make the sale
• statement that the property has no claims against it
• statement that the grantor will settle all future claims against the property
• full name, identification, and contact information of both parties 
• transaction date and the amount being paid

While you can find warranty deed templates online, they might not meet your state’s legal requirements. A real estate agent or attorney can help you draft an on-point deed that truly protects your ownership rights and gives you the peace of mind you seek. 

Costs

Expenses associated with warranty deeds include the cost of performing title searches and surveys, drafting the deed, and the court’s recording fees. If you hire a real estate attorney (which is advisable), you may face a higher expense. The final figure also hinges on the type and size of the purchased property.

FAQs

What’s the difference between a warranty deed and a title?

A warranty deed keeps property free from outstanding liens and ownership claims. It doesn't prove ownership. To be known as the official homeowner, the seller needs to transfer the title in your name. 

What types of claims are protected by warranty deeds?

Warranty deeds protect against title issues and property ownership claims, such as mortgages and liens. However, warranty deeds do not cover contractual issues and outstanding debt, such as unpaid fines from code violations. 

How is a warranty deed different from title insurance?  

While a warranty deed and title insurance might appear to be the same, they actually serve two different purposes. A general warranty deed safeguards a buyer from title claims. A title insurance policy provides greater coverage and protects potential buyers from issues like fraud, conflicting estate wills, unpaid fines, and tax liabilities. To get first-class protection and coverage, get both a warranty deed and title insurance. 

Is getting a warranty deed good? 

As a buyer, getting a warranty deed is a positive step in your homeownership journey. You are making a significant, possibly once-in-a-lifetime purchase, and you want to ensure you are protected in case ownership issues arise. 

For a seller or real estate investor, a warranty deed sets your property apart from the rest. The buyers know you have nothing to hide and have rightful ownership of the property.