The closing process’s culmination is the deed’s execution and recording. At first glance, it is easy to gloss over this crucial document and assume that the seller is warranting title to the buyer, but what guarantees are received? In your average residential real estate transaction, a General Warranty Deed, also known as a Statutory Warranty Deed, would provide maximum protection for a buyer. While there are many different deeds, it is important to know what protections the purchaser receives with each!
Quitclaim Deed:
The Quitclaim Deed (sometimes erroneously referred to as a “Quick Claim Deed”) transfers whatever title the seller currently has in the property without any warranties found in a Special Warranty Deed or General Warranty Deed. While these deeds are commonly used when transferring property between family members, during divorces, or transferring into and out of entities owned or operated by the current title holder, Quitclaim Deeds are not utilized in formal real estate transactions due to an absence of any sort of warranty of title on the part of the seller. In addition, it is essential to note that using a Quitclaim Deed to transfer title may terminate title insurance coverage, and most reputable title insurers will not issue title insurance when one is used.
Special Warranty Deed:
The Special Warranty Deed grants protections to the buyer but is limited in the span of coverage. This particular deed conveys an interest in the property to the buyer and provides the buyer a warranty of title from the time the seller obtains title through the day the new buyer obtains title. Conveying via this particular deed is common in new construction and vacant land deals, specifically mentioned in Section 8 of the Vacant Land Contract. Section 8 allows the seller to convey via a Special Warranty Deed, limiting their potential liability, or via Statutory Warranty Deed.
General Warranty Deed:
The General Warranty Deed contains promises from the seller to the buyer stating that they have good title and will defend against any possible defects that may arise. In addition, the General Warranty Deed contains six specific covenants that protect the purchaser. These covenants state that the seller has the legal right to possess and sell the property in addition to disclosing all encumbrances that may affect the subject parcel. Further, the seller warrants that they will protect against any claims by a third party, guarantees that the purchaser will be free of any third-party interference, and will defend against any title defects that may arise. The main difference between the General Warranty Deed and the Special Warranty Deed is duration. Whereas the Special Warranty Deed only covers the time in which the seller owned the property, the General Warranty Deed not only covers the seller’s ownership but that of all prior owners.
The Importance of Title Insurance:
What if a General Warranty Deed is used, but clear title is not received? Is your client’s only recourse to sue the seller? Not if you have title insurance! Title insurance provides another line of defense should a defect be discovered during ownership. Unfortunately, correcting issues with titles can often be expensive and time-consuming. Title insurance eases the pain of this unfortunate situation by protecting the buyer and correcting many issues that may pop up.
While many other deeds are drafted for specific situations, these are three of the most widely used when transferring property. As you can see, each has its differences and accomplishes different goals for the parties. Should you have any questions about this topic, please do not hesitate to reach out to your local trusted real estate attorney.
