Warranty deed: What it is and why it’s necessary when buying a home

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When you’re doing all the legwork to buy a home, there’s an essential piece of information you’ll need to feel confident about when making the purchase: that someone else isn’t going to be able to claim that they own it, too, or that you owe them money for part of it. A warranty deed is a legal document designed for exactly this kind of comfort, protecting you against any outstanding debts or claims on the property.

How does a warranty deed work?

While you might think of the parties involved in a real estate transaction as the seller and the buyer, a warranty deed uses more official legal language. The seller is the grantor — that’s the current owner who’s going to “grant” someone else the home — and the buyer is the grantee, the person who will now have complete stake in the property.

“The purpose of a warranty deed is to give assurances to the grantee that they are receiving the property free and clear of prior liabilities related to the title,” explains Jim Erwin, founding partner of Erwin Law LLC in Chicago and an expert in real estate and entrepreneurial business.

“The nature of those warranties depends on the language contained in the deed,” Erwin says.

If you’re applying for a mortgage, your lender may require a warranty deed in order to approve the financing, with the deed typically signed prior to closing the sale of the home. The seller’s signature indicates that they have the authority to transfer the ownership rights to the property to the buyer. If anyone else says that they are owed money for the property, the buyer now has a document that proves he or she isn’t responsible for the debt.

Let’s say a plumber claims that he is still owed $800 for a job he performed when the previous owner occupied the home. A general warranty deed would stipulate that the previous owner must pay the bill.

If a warranty deed could speak in layman’s terms, the message from the seller would be simple: “I promise that no one is going to knock on your door and say that they have any rights to this property.”

General warranty deed vs. special warranty deed

There are two main types of warranty deeds:

  1. General warranty deed
  2. Special warranty deed

The difference between the two is that a special warranty deed may only go so far.

“If the deed contains no limitations on the warranties, then it is a general warranty that the [seller] is transferring its entire interest free and clear of any outstanding debts, liens, mortgages or other encumbrances that the [buyer] has not agreed to accept,” Erwin says. “A special warranty deed is similar except that it contains limits on the [seller’s] warranties — they are limited only to the period of the [seller’s] ownership.”

Let’s say you receive a warranty deed from someone who owned a piece of property from 2017 to 2019. Later, someone who owned the property outside of that timeframe claims he or she still owns it. If you have a general warranty deed, you’d be protected. With a special warranty deed, your options are limited, and you may be vulnerable to past liabilities like this one.

Both of these types of warranty deeds, however, are better than a quitclaim deed, which offers no real protection to the buyer at all.

Does a warranty deed mean you own the property?

A warranty deed doesn’t technically mean you own the property; it means that the previous owner made you a guarantee that he or she owned it outright and that no one else can claim they are owed any money. The official evidence of your ownership of the property is the title.

How to get a warranty deed

Buying a home is a big deal — it’ll likely be the biggest purchase you make in your life — so you want to make sure that no one else is going to challenge your rights to the property. Given what’s at stake, a warranty deed is essential.

“As a buyer of real estate, one should always get a warranty deed,” Erwin says. “Even if an interest in real estate is being acquired in a non-purchase situation — such as a settlement or a trade or as collateral — the recipient of the interest should insist on a warranty deed.”

If you’re buying a home, a real estate lawyer can make a warranty deed a requirement in order for the transaction to take place. If you’re selling your home, there are many ways to download a warranty deed template online. To make the deed part of official records, be sure to get the document notarized and filed at your county clerk’s office.

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Written by
David McMillin
Contributing writer
David McMillin writes about credit cards, mortgages, banking, taxes and travel. David's goal is to help readers figure out how to save more and stress less.
Edited by
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