A general warranty deed is commonly used in real estate property deals to ensure protection for the buyer. The warranty deed confirms that the property is free and clear of all creditor claims and liens, or that the seller will be responsible for any that do exist.
Keep reading to learn everything you need to know about general warranty deeds - what they are, how they work, why they are used, and more.
What is a General Warranty Deed?
A general warranty deed is a legal agreement that protects a property buyer from any debts held against the property they’re purchasing. If such a debt emerges after the sale, the seller, not the buyer, is financially responsible for that debt.
To clarify, a deed is used to transfer ownership of property from one party to another. For real property, warranty deeds are common. These are enhanced deeds that are designed to protect buyers from debt where the property was used as collateral. Such instances are referred to as “title defects.” This can include any lien, mortgage or other debt that might encumber the property.
A general warranty deed can take the concept to the extreme. It might offer protection for the buyer from all title defects, even if the previous owner was unaware of them.
How Does a General Warranty Deed Work?
A general warranty deed works by promising that a property is completely free and clear of any financial obligation. In order to make this promise legally binding, the deed includes important information about the sale. This information typically includes:
The date of the sale
Who was involved
A description of the property
With that guarantee in place, if any breaches of the warranty occur, a buyer can call upon the general warranty deed to insist that the seller resolve the issue. Generally speaking, the buyer will first contact the seller to take care of the problem. If the seller does not or cannot resolve the issue, then a general warranty deed can provide a lot of power in a civil court case.
What Is Included in a General Warranty Deed?
A general warranty deed is a legal contract between a Grantor and a Grantee. The Grantor is the person selling the property, and the Grantee is the person buying it. In order to be legally binding and valid, the deed will generally include the following:
The date of the sale or transfer
Signatures of the Grantor and Grantee (often signed in the presence of a notary)
A legal description of the property (often taken from the previous deed)
A statement of property transfer
A statement that the Grantor is the legal owner at the time of the sale
A statement that there are no claims against the property
A guarantee that emerging claims will be covered by the Grantor
When is a General Warranty Deed Used?
General warranty deeds can be used for any sale or transfer of property, but they’re more commonly used for the transfer of real property (real estate). This would refer to assets that can be used as collateral in a loan. Because of this, general warranty deeds are almost always found when residential property (or real estate) is sold.
A general warranty deed is less likely to be used when the sale cannot reasonably justify such a powerful warranty. This might include something like a state property sale after property was seized in a criminal case. The state is not going to assume responsibility for title defects that predate the seizure. So, it makes sense that the state will likely avoid using a general warranty deed.
The simplest way to look at it is this: general warranty deeds are only a reasonable option when the Grantor can safely assume responsibility for providing a free and clear title.
What is the Difference Between a General Warranty Deed and a Special Warranty Deed?
Since a general warranty deed covers all title defects, it’s safe to assume that a special warranty deed would be more limited. This is, in fact, the case.
Typically, a special warranty deed is designed to only cover title defects that occur during the stint of ownership. So, if you own a house for a 10-year period, you might use a special warranty deed to guarantee that no title defects occurred during those 10 years. This special warranty would not cover any liens or encumbrances that predate you purchasing the property.
With this limitation, special warranty deeds are more common in transfers after a foreclosure or property seizure. You can also sometimes find them in some commercial transfers.
How to Use a General Warranty Deed
In order to use a general warranty deed, specific steps are necessary. For starters, each state has a state-specific form that should be used for general warranty deeds in that state. The form has to be filled out correctly. It also must be signed by both parties, and usually witnessed by a notary. Then, it has to be filed with the county registrar’s office. Once the deed is properly filed, the property transfer can be considered complete.
Typically, Grantors use title insurance when committing to a general warranty deed. The insurance provider takes responsibility for researching the title to ensure that it is, in fact, free and clear.
Create Your Estate Plan Today to Protect Your Assets
Now that you know everything you need to know about general warranty deeds as they relate to real estate and property, you’re ready to take the next step and update your Estate Plan to make sure all your existing and newly-purchased property assets are well protected.
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