There are several types of deeds used in real estate transactions, and understanding the differences between them is crucial for anyone involved in property transfers. This article serves as a guide to help you navigate deed vs. deed scenarios. We will compare the protections and uses of different types of deeds, including a dedicated section on warranty deed vs. quit claim deed, to help you choose the right option for your needs.
Table of Contents
Differences between the Deeds
General Warranty Deed
A general warranty deed is the most common type of deed used for transferring real estate. It basically promises that:
- not only does the seller have good and proper title to sell the property, but all the prior owners also had good title, thus making a complete “chain of ownership”; and
- the property is free from any encumbrances, liens, or other such restrictions unless the deed specifically lists them.
A general warranty deed is guaranteeing the grantees' legal rights to the property, providing the highest level of protection for buyers or recipients of the property transfer.
Therefore, the seller must defend the buyer against all claims on the validity of the title, regardless of when the alleged defect on the title occurred.
A “defect” on a title prevents the property from being sold until the defect is remedied. Common examples of defects include liens, encumbrances, or judgments against the title. A defect can also occur if a deed transferring the property is improperly executed or recorded.
Special Warranty Deed
A special warranty deed makes the same warranties as a general warranty deed except that those promises only apply to problems with the title that may have arisen during the seller’s own possession of the property. The seller is not making any warranties as to whether problems in the chain of title arose under prior owners of the property. What this means for a potential buyer is that the seller will not protect the buyer should anyone allege a defect in the title occurring before the seller had possession. The seller only promises to defend against defects that may have occurred while he or she owned the property.
Quit Claim Deed
A quit claim deed provides the buyer the least amount of protection but is also the quickest and cleanest way to transfer property title. For example, a quit claim deed is often used to transfer ownership of a house from one family member to another trusted individual. In it, the seller makes no warranties whatsoever as to whether he or she has proper title to the property.
Most of the time, quit claim deeds are used for land or house transfers between family members, where there is a lot of trust between the buyer and seller. It is important to note that a quit claim deed only transfers whatever legal right the grantor has to the property and does not guarantee that the grantor actually owns the house.
Which Deed Should I Use?
General Warranty Deed
The majority of transactions call for general warranty deeds because the buyer will want assurances that he or she is getting good and proper title to the property. To do this, the buyer will normally obtain a full title search and title insurance.
Special Warranty Deed
Special warranty deeds are often used by builders because they only owned the property for a short period of time during construction and do not want to make promises as to the prior owners. They are also used with commercial buyers and sellers and in foreclosure actions because such parties never had a very close relationship with the property and normally will not make warranties as to prior owners in the chain of title.
Quit Claim Deed
Finally, as mentioned before, quit claim deeds are mainly used between two parties that have a high degree of mutual trust in each other, such as between family members. A father may quit-claim a property to his son because the father knows the son would never take him to court over the matter and the son knows the father would still defend his title if there were ever a claim against it. Another common instance where people use quit claim deeds is to transfer property to a revocable living trust. The person creating the trust still usually has control over the property after it is put in the trust and the change in ownership is in name only, so it is not necessary to make any warranties.
Real Estate Transactions
Real estate transactions are the process by which ownership of real property is transferred from one party to another. Whether you are buying your first home, selling real estate, or transferring property between family members, the type of deed you use plays a crucial role in protecting your interests and ensuring a smooth transfer of ownership.
In any real estate transaction, the grantor (seller) conveys their ownership rights to the grantee (buyer) through a deed. The choice between a warranty deed and a quit claim deed can have a significant impact on the level of protection the buyer receives. A warranty deed, whether it is a general warranty deed or a special warranty deed, offers the buyer important guarantees. For example, a general warranty deed makes a broad promise that the property title is free from liens, mortgages, or other outstanding claims, not just during the seller’s ownership but throughout the entire history of the property. This added protection is why general warranty deeds are most commonly used in residential real estate transactions, especially when unrelated buyers and sellers are involved.
A special warranty deed, on the other hand, limits the seller’s guarantee to the period during which they owned the property. This type of deed is often used in commercial real estate transactions, foreclosures, or when the seller has only held the property for a short time. While it still provides some protection against title defects, it does not cover issues that may have arisen before the seller’s ownership.
Quit claim deeds are quite different. A quit claim deed makes no guarantees about the property title at all; it simply transfers whatever ownership interest the grantor has, if any, to the grantee. Quit claim deeds are often used in situations where there is a close relationship or a high level of trust between the parties, such as transferring property between family members, adding a spouse to a property title, or moving property into a living trust. Because quit claim deeds offer the least amount of protection, they are generally not recommended for transactions between unrelated parties or when the buyer wants assurance of a clear title.
When deciding which type of deed to use, consider the level of risk you are willing to accept and the nature of your relationship with the other party. Most buyers prefer the security of a warranty deed, especially when purchasing from someone they do not know. However, in transactions involving family members or trusted parties, a quit claim deed may be sufficient.
No matter which type of deed you choose, it is wise to consult with an experienced real estate attorney. They can help you understand the key differences between quit claim and warranty deeds, conduct a thorough title search, and ensure that your real estate transaction is legally sound. By making an informed decision about the type of deed, you can protect your property rights and avoid potential legal action or title issues down the road.
How to Create a Deed
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