All About Warranty Deeds—Learn about the different types of deeds available when you purchase your home

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Warranty Deeds generally include the following:

• Bargain & Sale
• Corporate
• General
• Special
• Quit-Claim

Warranty Deeds are used by the Grantor (one who gives a deed) to convey title to the Grantee (one who receives a deed) at the time of sale or otherwise transfer title and the most common for residential sales are general and special warranty deeds.

Bargain & Sale Deed

Bargain & Sale Warranty Deed is one in which the Grantor (seller) implies to have or have had an interest in the property BUT offers no warranties of title to the Grantee (purchaser). This type of deed is used to transfer title in many states, however from my experience a bargain & sale deed is rarely used in the metropolitan Atlanta area. 

Corporate Warranty Deed

This type of deed is used in a number of states as well. It is used to convey title to property that is corporately owned. I have seen it used quite extensively in Florida. 

General Warranty Deed

A "general" warranty deed is normally used to convey title when a homeowner sells a property. Because there was a homeowner (grantor) involved the homeowner warrants against all defects that the ownership and title is good, the property is free from encumbrances, and provides the right to quiet enjoyment.

If you are a buyer (grantee), this type of deed provides you with the MOST protection against any other claim to title of the property. You can make a claim against the grantor because the deed warranties against all defects.

This is the most common type of deed that you would receive if you were to purchase from a seller in the state of Georgia.

Special Warranty Deed (Limited Warranty Deed)

For those (banks, government agencies, auction companies, builders and the like) who are not confident about the title history of a property they may now own due to foreclosure or other means—they normally would convey title with a "special" warranty deed.

It is a deed in which the grantor (banks, government agencies, auction companies and the like) LIMITS the title warranty if you were the buyer (grantee).

The grantor does not warrant against title defects arising from conditions that existed BEFORE they owned the property. You cannot make a claim by, through, from or under the grantor if you receive a special warranty deed as a home purchaser.

Quit-Claim Deed

A quit-claim deed is often one of the most talked about and clearly misunderstood of the five deeds. Many call it the Quick-Claim Deed and many think that the property can be transferred with the stroke of a pen.

A quit-claim deed is actually a deed that conveys only the Grantor’s rights or interest in real estate, without stating the nature of the rights and with NO warranties of ownership.

A quit-claim is often used to remove a possible CLOUD (dispute) on the title.

Let’s say you own a property jointly with your brother and you buy your brothers percentage of ownership. You now want to sell the property so in order to have “marketable title”, you would obtain a quit-claim deed from your brother and subsequently record it so that you would now have marketable title.

Marketable Title is a title so free from defect that a court will enforce the title’s acceptance by a purchaser.

If there is a cloud on the title that means that there is an outstanding claim or encumbrance (burden) that, if valid would affect or impair your (owner’s) title.

Other Types of Deeds:

What is a Grant Deed

This Deed is normally used in California and requires no witnesses on the document. If you don't live in California or other select states the "Grant Deed" would not normally apply in your state.  It is used to convey real estate in a similar manner as the deeds mentioned above.

What is a Security Deed

A "Security Deed" is utilized by a purchaser who obtains a loan (Grantor) to convey a security interest (in the property in which they are receiving a loan) to the lender (grantee). The deed secures to lender the repayment of the loan by the borrower(s).

Failure to repay the loan or any default of the loan gives the lender (and successors or assigns) the right of "power of sale" where they can then foreclose on your property and sell it at public auction.

What is a Trust Deed?

In real estate in the United States, a deed of trust or trust deed is a deed wherein legal title in real property is transferred to a trustee, which holds it as security for a loan (debt) between a borrower (you) and a lender (three parties are always involved).

The equitable title remains with (you) if you were the borrower. As a borrower you wold be referred to as the trustor, while the lender would be  referred to as the beneficiary of the deed of trust. 

In the United States lending for home loans are generally done as a mortgage—where foreclosure is judicial in nature—or as a trust deed—where foreclosure occurs when a borrower falls behind on the payments—and the lender initiates the foreclosure process. 

A trust deed or deed of trust contain a special "power of sale" clause—that permits the trustee to exercise these powers.

What is Deed In Lieu of Foreclosure?

It is the process of a current homeowner(s) giving back the property to the lender to avoid the formal foreclosure process.

As a current homeowner your credit would take a serious hit for years to come, therefore this homeowner initiated process should be used cautiously.

It may be wise to seek competent legal and other professional advice prior to initiating the deed in lieu of foreclosure process.

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Key Points To Remember

With any type of deed where property is conveyed, it is imperative that you get "owner's title insurance" at the time of closing to protect your interest in the property.

As a practical matter most lenders clear up title and other issues when they foreclose on a property, however owner's title insurance is something you should obtain on all real estate that you purchase to protect your interest in the property.

Keep in mind that there are policy limits, therefore you should be aware that if there are future title issues you will only be protected for the amount listed in your policy—usually the purchase price. So, if your property appreciates substantially your protection would be limited to the amount stated in the policy.

In addition, if you refinance your loan with the same lender—you may not need to purchase title insurance (initial policy would still be valid)—however your lender would need to purchase a new policy (depends on your State law) to protect their interest in the property.

In addition to understanding your type of deed you should also know how you will title your property as the way you title your property and the type of deed can affect your and your family's future.

What is a Short Sale?

A short sale is when a homeowner attempts to sell their property for less than the loan amount owed on the property. A short sale is contingent upon the approval of your mortgage company. Be sure to utilize competent professionals if you are considering a short sale. 

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About This Article:

 

The above article was written by Thomas (TJ) Underwood.   Thomas (TJ) Underwood is an active real estate broker in the state of Georgia and is the writer behind The Wealth Increaser, Home Buyer 411,  Home Seller 411, The 3 Step Structured Approach to Managing Your Finances, Managing & Improving Your Credit & Finances for this MILLENNIUM and CREDIT & FINANCE IMPROVEMENT MADE EASY—FREE GUIDE. 

He is the creator of TheWealthIncreaser.com where he regularly blogs about helping consumers improve their credit, finance and real estate pursuits in an intelligent, consistent and proactive manner.  He’s always looking for ways to make intelligent finance improvement happen for those who “sincerely desire” success in their future. 

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