When Do You Need a Warranty Deed?

Sometimes it’s best to use a warranty deed to transfer property. It’s common whenever there’s a seller and buyer who didn’t know each other before their deal. In fact, a mortgage lender or insurance company could insist on a transfer by warranty deed. But why?

A warranty deed transfers a title with certain protections. This is in contrast to a quitclaim deed, which may be perfect when (a) both parties know each other, and (b) the person who transfers the deed originally got the property with a warranty deed.

A warranty deed promises a buyer that the seller owns the property, and has full rights to transfer the title. In a nutshell: anyone involved with the transaction or financing can rest assured the title is clear.

What the Warranty Does for the Buyer

If you are buying or selling a home, you’ll typically get or give a warranty deed.

The warranty ensures that the buyer gets a property unburdened by liens for someone’s past debts. It asserts that the boundary is good, and no one else can claim a part of the land. There are no additional owners waiting in the wings. There are no unpaid mortgages, no lines of credit secured by the property.

Sellers can be wrong about some of their promises. If a title turns out to be compromised, and the buyer learns this after closing on the home, then what?

Then the buyer can sue the seller for a breach of the warranty’s specific covenants. Buyers look for that protection, and a buyer’s agent typically insists on it.

Still, a warranty deed has a shelf life. More on this below. To extend their peace of mind, many home buyers decide to get owner’s title insurance at closing. It’s a backup measure, just in case the title has issues earlier owners might not have even known about. In short, it can make good sense to get both a warranty deed and the optional owner’s title insurance.

We invite you to learn more about home title protection on Deeds.com. Now, let’s look at the nuts and bolts of the warranty deed.

How to Create a Warranty Deed for a Home Purchase

Real estate agents traditionally help their clients through the transfer process. While you may independently download and complete a warranty deed form, you may want to hire a real estate attorney to draft, or at least review, your deed.

Your deed names the people, identifies the property by its legal description, and “grants and conveys” the property as of a specified date. The deed states the full, legal names of the seller (called the “grantor” on a deed) and the buyer (the “grantee”). It should state how the buyers, if there are more than one, want the property vested.

As for the property description, the new deed should match the current deed. An accurate property description would guide a surveyor to find and identify the property with precision. Your deed may refer to a recorded plan for a subdivision. A metes and bounds description defines a property outside of subdivisions.

A deed should also:

• Disclose any easements and other encumbrances known to exist on the title.

• Refer to consideration — anything of non-trivial value given in exchange for the deed.

• Refer to the warranty the seller is providing to the buyer.

For buyers: Fill out the certificate of residence (address of new home) of the buyer, to which the county will send the deed after recording. When it comes in the mail, read it. Know your rights and limitations as a deed holder.  

Before the purchase money leaves the escrow account, the seller signs their full legal name on the deed. To be acceptable for recording, warranty deeds must be signed with a notary public, and stamped with the notary’s seal.

Not All Warranty Deeds Are the Same

A general warranty deed is typical in home sales. This type of title transfer provides the strongest assurances and protections for a home buyer.

Its promises, known to lawyers as covenants, assure the buyer that there no problems with the home’s title related to the seller’s history or the histories of earlier owners. The heft of this coverage is why most lenders want mortgage borrowers to have general warranty deeds.

You might have also come across the term special warranty deed. This type of deed offers lesser protections. It only tells the buyer that no liens or other claims against the home’s title were formed during your seller’s period of holding the deed.

So, is the title free and clear with a special warranty deed? Not necessarily. There might be claims arising from the actions of a prior owner.

In some states, special warranty deeds are called grant deeds. Here again, these do not shield a buyer from claims arising from before the seller acquired the home.

All sellers who convey a warranty deeds make binding promises to some degree. It’s good to know what they cover, and how long that coverage lasts after closing day.   

Can the Buyer Really Sue? As the Seller, When Am I Off the Hook?

Yes, a buyer can sue. But there are limits to how long they have to bring legal actions.

Say someone tells the buyer that the deed you transferred isn’t valid for all of the land you think you had. How long can the buyer come back and demand you make it right?  

In many states, deeds customarily promise to “forever defend” the promises they make. But wait. Isn’t there a statute of limitations that frees the seller from legal obligations at some point? Yes. And that statute will guide a court’s determination. If your state’s statute of limitations runs for, say, four years, or six years, but the sale was seven years ago, then the buyer’s probably out of luck.

Once a warranty deed has been signed and delivered to the buyer, the warranty deed’s protections are formed. So, for a deed’s present promises (that the seller makes, saying they have the legal right to convey the deed), the statute of limitations starts on the date of the transfer. A warranty deed also makes promises in future covenants. For those, the statute of limitations begins when some third party claims to have rights against the property.

When you transfer your home using a warranty deed, you give your buyer long-lasting assurances. Future title actions can be brought up to 20 years after the transfer, if buyers get these assurances “under seal.” Buyers can receive a transfer “under seal” just by including the word “seal” beside the signature line and notary acknowledgement. Online forms may offer “seal” language in their templates, like this:

On [date], before me, [name] personally appeared and signed, sealed and delivered this document…

Such a warranty can be upheld in court for 20 years. State laws vary, and so do specific deed transfers. Check the requirements of your county and state for fees and additional guidance.

Still have questions or concerns? Consult an experienced real estate attorney before closing day.