What Is a Warranty Deed?
A warranty deed is a type of deed that assigns the state warranty to the title of the property being transferred. The warranty protects against claims that are made against ownership of the property, for example, if someone says your land belongs to them.
The warranty protects you (the buyer) and your successors (heirs), owners, and assigns forever unless a warranty claim is made.
Types of Warranty Deeds
The warranty deed has two warranties: the warranty against claims of ownership and an additional warranty, called a special warranty.
Warranty Against Claims of Ownership
The warranty against claims of ownership protects you from any title problems that may have been created by the party who sold you the property or their heirs.
For example, if someone had a lien on the land that was not cleared when they sold it to you, this warranty protects you from having to pay the creditor. This warranty lasts for 10 years against any claimant who had or could have known about the lien.
The special warranty is in addition to warranty against claims of ownership and protects you from claims other than those created by the seller.
For example, if someone without ownership of the property inherits an interest in your land, warranty against claims of ownership wouldn’t help you because a warranty protects only claims made by owners.
Special warranty lasts for 10 years, and it protects you from warranty claims made by anyone who could have known about the problem before your warranty expired.
How Warranty Deeds Work
A warranty deed is a document that shows a warranty in favor of a purchaser for valuable consideration.
The warranty, which must be expressly created by the seller, provides an assurance to the buyer that he or she has clear and marketable title to the property being transferred.
This warranty assures the buyer that the seller is the rightful owner of the land and that no one else has a valid claim to ownership.
Although warranty deeds must contain certain information under state law, they may also typically include more specific terms created by the parties involved in the transaction.
For example, warranty deeds are often used when property is mortgaged before it is transferred to help protect against existing liens.
The warranty deed is signed by the seller, states that the seller warrants good title to the property, and declares that the warranty will exist as long as anyone owns any interest in the property.
This warranty protects a subsequent purchaser against claims of ownership made after the warranty deed is executed. In a warranty deed, it extends not only from its date of execution but from the time of recording also.
In a warranty deed, you must report any matters known to you that will affect the value or desirability of your property.
For example, potential problems with a building or zoning requirements must be disclosed even if you know about them and don’t think they matter.
If the warranty excludes certain items, it must be done in a written agreement that is signed by both parties.
Who Can Help You With This Process and How Much Will They Charge You for Their Services
Anyone can do warranty deeds. There are many attorneys that can help with this process or a title company. You may want to check with your real estate agent, the county recorder’s office or a title company for warranty deeds services.
You can also go online and look at warranty deed preparation services online who will prepare warranty deeds for you in exchange for a fee of around $250.
Thus, when hiring someone to complete this task for you, make sure you ask them:
– How much will they charge you for their services?
– What documentation and information do they require from you to complete the warranty deed process?
– Is there a warranty deed template that they use, or do they create warranty deeds themselves?
Please keep in mind that warranty deeds can be fairly easy or very difficult to complete, depending on the situation.
For example, warranty deeds can be used when someone inherits land from their relative and there is no will or other documentation about who previously owned that property.
In cases like these warranty deeds are a great solution because they don’t require a lot of information.
However, if your situation does not meet the requirements for warranty deeds, or warranty deeds are not recommended, there are other options available to you.
Do I Need to Get Insurance for My Property Before Getting a Warranty Deed?
No, warranty deeds do not require insurance. However, you can purchase title insurance for warranty deeds if you want to protect your warranty deed against loss or damage.
Title insurance protects you by covering claims that may arise after the warranty deed has been executed.
For example, warranty deeds are often used when the property is mortgaged before it is transferred to help protect against existing liens.
In these warranty deeds, title insurance protects the warranty deed from loss or damage if a prior lienholder claims ownership of the land through foreclosure.
Title insurance also protects you in cases where someone has an easement over your property without your knowledge and you need to clear up the matter.
A warranty deed is an important legal document that protects your interests as warranty deed holder.
You want to make sure you’re not purchasing warranty deeds for properties with outstanding problems, but warranty deeds are a great way to protect yourself if you purchase warranty deeds without any problems.
Disclaimer: The above references an opinion and is for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.
About the Author
True Tamplin, BSc, CEPF®
True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.
True is a Certified Educator in Personal Finance (CEPF®), a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.