What Is a Warranty Deed?

If you are buying real estate, make sure you understand the important protections you get with a warranty deed.

If you are buying real estate from someone you don't know you will probably want to get a warranty deed. It is a deed—a legal document that shows proof of ownership—with an added promise: The seller promises to protect the buyer if it turns out someone else has a claim on the property.

A warranty deed works in much the same way for real estate purchases that a bumper-to-bumper warranty works for cars. Just like a car warranty guarantees the buyer that the car will work properly or the manufacturer will fix it, a warranty deed assures the buyer will own the property free and clear of debts, obligations and other claims, and the seller is responsible for anything that interferes with that right.

What Does a Warranty Deed Cover?

Claims that might interfere with a buyer's ownership rights include a previous or current owner who was never removed from the legal record, a bank that held the property as collateral for an unpaid loan, a city or other government agency owed taxes on the property, or anyone other than the buyer who claims the right to use the property.

Let's say you decide to buy a store for your retail business. The sale closes but sometime later you learn that a previous owner never paid property taxes, and the city wants to take possession of the property to get its payment. Or maybe the deed shows that the property includes four parking spaces, but a neighboring store owner tells you a previous owner gave that store the right to use some of them.

These examples would not stop the sale from going through, but you might be held liable for these debts and obligations. A warranty deed protects you from having to buy out surprise owners, pay off debts, or honor obligations even if the person who sold you the property wasn't aware of them.

When Do You Need a Warranty Deed?

Mortgage companies typically require a warranty deed if they are financing the property, but when you are buying a property from someone you don't know, regardless of the manner of financing, it's a good idea to get a warranty deed.

These deeds protect you from the debts and obligations of not only the seller, but from any past owners or creditors as well. A special warranty deed is another type of deed that also protects buyers from other claims on the property, but only for the time period that the seller owned the real estate.

How Does a Warranty Deed Work?

Before a warranty deed is issued, a title company conducts a search of all the previous owners of the property and any unpaid debts, unresolved court judgments, or other obligations. If problems are uncovered, they can be addressed before the sale closes. If the title company does not find any problems, they do what's called clearing the title. A clear title allows the sale to move ahead and the transaction can close.

Sellers often don't want to rely on a clear title alone, and they buy title insurance to protect from any potential financial losses. Buyers also often buy title insurance for added protection in case a seller isn't willing to take responsibility for an issue that arises later. Mortgage companies usually require buyers to have title insurance to obtain financing.

Sometimes a seller will ask the buyer to take on certain debts or obligations during the sale negotiation. A seller who is behind in mortgage payments, for example, might ask the buyer to take on the debt in return for a reduction in the purchase price. The mortgage debt would be listed as an exception to the warranty deed in this example, and the buyer would be responsible for making the back payments.

How Is a Warranty Deed Prepared?

A warranty deed is prepared and filed by the seller, known as the grantor. The grantor then signs the deed in front of a notary and registers the signed deed with the county recorder's office.

The deed should include the following information:

  • the date of the transaction
  • the names and mailing addresses of the buyer and seller
  • the amount of money the property is being sold for, and
  • a legal description of the property being sold (usually taken from the original deed if nothing has changed) including the parcel number.

Templates for warranty deeds are available online and in stationery stores. Once the deed is signed by the seller and notarized, it must be registered with the county recorder's office, sometimes called the county registrar, land registry office, or the register of deeds. The seller keeps a copy of the recorded deed and gives the original to the buyer.

What Is the Difference Between a Warranty Deed and a Quitclaim Deed?

Unlike a warranty deed, a quitclaim deed doesn't offer any guarantees. It simply transfers interest in a property from one party to another with no promises about what is being transferred. If any issues arise from the transfer, the grantee has no legal protection.

Quitclaim deeds are typically used to transfer property among family members because they involve a degree of trust and confidence that any problems that arise can be settled out of court.

Some examples of when quitclaim deeds are used include:

  • when a parent wants to transfer ownership of a property to a trust for tax purposes or estate planning
  • when a property owner marries and wants to add the spouse to the property deed
  • when a married couple divorces and the spouse retaining the property wants to remove the other from the deed, or
  • when there is an administrative error such as a missing signature or a misspelled name in the original deed.

Quitclaim deed transfers usually aren't used when there is a mortgage on the property. But if there is a mortgage on the property, the responsibility for paying it would remain with the person making the transfer, not the person to whom the property is transferred.

How to File a Quitclaim Deed

Since the procedures for quitclaim deeds differ from one state to another, it's important to check with the state where the property is located for information. To create a quitclaim deed, see Nolo's Online Quitclaim Deed form.

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