There are a few different types of deeds used to pass title from one party to another. General warranty deeds are the most common deeds in real estate transactions and offer the grantee, which is the receiving party, the highest level of covenants and protection.
In this article:
- When are General Warranty Deeds Used?
- Protections Offered by a General Warranty Deed?
- Liabilities and General Warranty Deeds
General warranty deeds are used in most real estate transactions. Special warranty deeds, which offer the same protections but only apply to the acts or omissions of the grantor themselves, are commonly used with commercial real estate transactions, but residential transactions (save auctions and other unique instances) usually employ warranty deeds. Lenders often require the use of a general warranty deed.
General warranty deeds are best for the buyer and allow new owners to take title without trepidations of liens, claims, encumbrances, or other matters that would negatively affect them financially or their status as owners. These are a few key protections offered by general warranty deeds:
- The grantor is the rightful owner and has a legal right to transfer title
- The property is free and clear of outstanding liens, unpaid taxes, easements, etc.
- The title is clear of defects, such as errors in public record
- The grantor guarantees that it will protect title against third-parties claims
- The grantor will do whatever necessary to make good the grantee’s ownership, such as fixing future title problems
Because the covenants and protections offered are strong for the grantee, they create liabilities for the grantor. If issues arise after the transfer of ownership with a general warranty deed, the grantee may sue the grantor for violating warranty of title. But to offset these liabilities, to protect the transferring party, and to be certain the title is free and clear, a full title search is usually performed.
A title company or real estate attorney will do a thorough scan of the property’s history — usually back as far as 40 years — which includes a history of:
- chain of title
- property tax payments
After the title search is performed and the title is deemed free and clear, the general warranty deed is used to transfer title. Typically, the title search goes smoothly, but as extra protection in case anything is missed, real estate transactions with a mortgage usually opt for title insurance. The insurance gets put into action if any disputes arise after the transfer of ownership.