You might have seen my article on ‘quitclaims’ or ‘special warranty deeds’
This article may represent what is the opposite of the quitclaim, a General Warranty Deed.
Obviously, a General Warranty Deed conveys title with warranty.
But, the legal world isn’t easy, and this legal document is no better.
Start your examination of the document by seeing if it has been prepared by an Attorney. That should be listed at the top of the document. It may also reference whether a title search or opinion has been performed.
If you don’t see this language, it might indicate to you that the owner drafted his/her own deed.
To aid in this understanding, next search for something on the document referencing title insurance.
I ask about these distinctions because it is important for you to understand who is responsible for the Warranty on the deed. There are multiple ways to give a warranty, including:
- Warranty by the seller. The seller warrants that there is free and clear title to the property.
- Warranty by the attorney, via title search/opinion. The Attorney has certified that he conducted a search and that there is free and clear title
- Warranty by title insurance policy. This is backed by a regulated insurance company who will pay your claim, legal fees, etc etc, if the title defect is covered by their policy.
Again, you can see that the ‘warranty deed’ is not as simple as it seems. For example, a General Warranty Deed with no title search performed by the Attorney (very common) will give you a warranty on the property, but the warranty is only enforceable against the seller that sold you the property. It is entirely possible that a seller could give you a general warranty deed and run off with your money, knowing that someone else had a previous mortgage on the house.
In short, you’ve received a general warranty deed with very little ‘meat’ behind it. The seller guaranteed the property, but if he has no assets or doesn’t live in the area, you might end up with a worthless piece of paper that you exchanged for a substantial amount of money.
On the opposite side of the spectrum is purchasing the property through General Warranty Deed being backed by title insurance. A qualified Attorney who has been approved by whatever title insurance company he chooses, performs a title search. He writes a report and submits to the title insurance company, who chooses whether or not to give title insurance. If defects in title are discovered, that Attorney often works with the title insurance company (in advance), to clear title and make sure that there are no future issues.
Even the issue of title insurance is not clean and easy: there are various types. But, title insurance will cover/give warranty for most buyers under most circumstances.
In short: buy title insurance and make sure you’re given a General Warranty Deed. But also, make sure that the Attorney preparing these documents for you knows what he is doing. The smallest detail could determine if you have someone that will pay a title defect, or if you’re left defending yourself.
If a Grantee is purchasing a property through a mortgage, the mortgage company will require that they purchase the property with a General Warranty Deed. After all, the mortgage company wants to make sure that you will repay their debt, and that some other entity won’t take the home from them. The mortgage company wants to be #1 in line.