Warranty Deed Vs. Quitclaim Deed – Know the Difference

Comparing warranty deed and quitclaim deed

It is important that real estate transactions that include transfer of property are conducted in a legal way to avoid any problems in the future. For this, a detailed legal document called deed is essential to be prepared between the parties who are conducting the transaction. It gives the legal description of the property and the terms. A person who is transferring his interest in a real estate is called a grantor, and the one who receives it is known as grantee. Though there are many types of deeds, two of the most important deeds for real estate transactions are warranty and quitclaim deeds. Both are used for the legal transfer of property from one person to the other. Both documents have to be signed in front of witnesses for the completion of the transaction. They help protect the buyer or the grantee from third party claims for the property. Though there exist similarities, there are stark differences between the two.

About a Warranty Deed

In a warranty deed, during the transfer of the title, the grantor or the seller warrants that his ownership of the property is clear and free of any kind of liens. This deed is mostly used for traditional sales transactions.

About a Quitclaim Deed

In this deed, the grantor’s ownership of the property is not explicitly mentioned or assured for that matter. It only states that the grantor will release the ownership rights and interest in the property to the grantee. This deed is not used for traditional sales transactions.

Tax Advantage
WarrantyDeed : There are no tax advantages in this type of deed.
Quitclaim Deed : As property is transferred from one family member to the other, the transaction is treated as gift and, thus, has tax benefit.
Ownership
WarrantyDeed : It guarantees seller’s ownership of the property.
Quitclaim Deed : This does not guarantee or assure the grantor’s or seller’s ownership.
Warranty
WarrantyDeed : Yes, the grantor or seller claims that he owns clear and legal title of the property.
Quitclaim Deed : No, the grantor does not warrant that he owns clear and legal title to the property.
Transfer of Title
WarrantyDeed : The seller of the property warrants that the property he owns is free of any kind of liens, lease, and encumbrances.
Quitclaim Deed : The owner merely transfers the title of what he owns to another party.
Utilization
WarrantyDeed : During sale of property, this deed is made use of.
Quitclaim Deed : This deed is not used during sale, rather is when the grantor is bequeathing the property after his death, adding spouse’s name to title, removing spouses name after divorce, or transferring it to a revocable trust.
Legal Protection
WarrantyDeed : The level of legal protection to the buyer is high.
Quitclaim Deed : The level of legal protection to the grantee is low.
Risk Factor
WarrantyDeed : The transaction has a lower risk.
Quitclaim Deed : The transaction may have higher risk.
Lien
WarrantyDeed : If there is any discrepancy in the facts mentioned in the warranty deed like change in area, name of the owner, forgotten lien, etc., the buyer may sue the former owner.
Quitclaim Deed : If there are any problems with the title or a forgotten lien on the property, there is little legal help for the grantee.
Damages
WarrantyDeed : The buyer is entitled to get a compensation for the damages.
Quitclaim Deed : The grantee does not have any right to claim compensation.
Insurance
WarrantyDeed : Warranty deeds can be backed by title insurance.
Quitclaim Deed : Quitclaim deeds cannot be backed by title insurance.
Parties
WarrantyDeed : The parties in this transaction have a buyer and seller relation, and may not necessarily know each other.
Quitclaim Deed : This transaction may occur between parties who are well-acquainted or even related to each other.
Significance
WarrantyDeed : It will work well in all property sale transactions provided the property has a clear title without any obligations. Also, the owner has complete ownership of the property.
Quitclaim Deed : They work well where the property is transferred from one family member to the other, and both parties know the details of this transaction; a third party is not involved.
Chances of Fraud
WarrantyDeed : Chances of fraud are limited as the seller will have to compensate (you) for damages, if any clause in the deed is false.

Quitclaim Deed : There are chances that you can end up paying for a property that the seller does not own in the first place.

A person may exercise a warranty deed for some part of the property and quitclaim deed for the remaining. Whatever be the case, it is highly important that you solicit professional legal help from a real estate lawyer for conducting legal documentation and formalities involved.

Our Verdict

A warranty deed is any day preferable than the quitclaim deed, especially when you are dealing with an unknown party. The lower risk and increased legal protection will work in your favor.

How Does a Special Warranty Deed Work

The seller has several types of deeds, which he can prepare when he decides to sell his property and therefore, his right of ownership. A special warranty deed is one of those deeds, along with the bargain and sale deed, the general warranty deed, and the quit claim deed. This deed, one can say, is a slightly modified version of the general warranty deed.

As the definition will doubtlessly tell you, it is a deed in which the seller warrants or guarantees the title only against defects arising during the period of his or her tenure or ownership of the property. This could be against claims and demands made by him or her and all persons claiming by, through, and under him or her. The grantor does not warrant against any title defects that existed before he or she owned the property.

How it Works

In a general warranty deed, the seller or the grantor promises a set of six covenants. These covenants state that the seller is willing to defend the buyer from any problems related to a bad title to the property, that may have arisen any time since the property has come into existence. Now clearly, there is a dodgy bit of detail as to why the current seller should protect the buyer from a bad title which is not really his doing. If the previous resident and owner gave it a bad title, there is no reason for the grantor to defend it. This sort of arrangement is not realistic at all, more so when the property for sale is a pretty old one and has passed through several hands.

With the special warranty deed, the grantor assumes as much responsibility as he or she ideally should. The grantor promises to remove any encumbrances that may arise due to his ownership, or if he is responsible for a bad title. Such deeds only include the covenant of seisin, the covenant of the right to convey, and the covenant against encumbrances caused by the seller. The other covenants for title are not usually included.

In a way, this sort of deed is more favorable to the buyer than say the quit claim deed or the bargain and sale deed. Unlike the quit claim deed, this document provides a modicum of protection to the buyer. It gives the buyer a bit of security that if the present grantor has conducted some sort of business, all the buyer has to do is point the finger in the direction of the grantor and he will subsequently take care of everything.

Usually, such deeds are not accepted by the buyer when there is a mortgage on the property. They are most commonly employed in property transactions where the seller did not own or occupy the property for a significant period of time and also by executors and trustees.

The special warranty deed form, by way of certain covenants, does promise to save the buyer from any encumbrances that may arise on account of bad title, but restricts the liability only up to the present grantor. The bad title creation by previous owners still remains a matter which the buyer has to make do with.

What are Deed Restrictions?

Be it home buying or selling, you have to carry out several formalities for the transfer of ownership. This may include a lot of paperwork, visits to the court, and other legal formalities. If you are thinking of buying a house or a plot for constructing property, along with all these formalities, you also need to think about obtaining and going through an agreement known as a deed restriction.

About Deed Restrictions

These are written documents, which relate to the conditions of using the property. These restrictions can include anything that is not supposed to be done using the property, or to the property itself. A good example of a deed restriction is a restrictive covenant. The conditions mentioned in it can differ based on the builder of the property, the type of real estate, and the location. For example, a developer may put restrictions regarding the number of floors in one building, what materials should be used for the construction, the building’s distance from the street, and business carried out from the premises.

Developers may even mention the materials to be used in making fences around the house, how many or what kind of pets can be allowed in the house, if surrounding trees can be cut, certain conditions for gardening and landscaping, etc. Similarly, there can be many such restrictions mentioned in the deed. Remember that the conditions remain with the property, and are to be followed by all property owners.

Who Carries Out Their Enforcement?

In case of land with subdivisions, the builder or developer initiates the restrictions on the property. After he prepares the restrictions, he then files them at the county office for them to be operational on subsequent property owners. However, the entity who prepares them should keep in mind, the comfort of the homeowners. Generally, the homeowners’ association is responsible for supervising: if people follow the obligations properly. However, in order to oversee these restrictions, there is no formal authority as such.

Who Should Follow Them?

They are to be followed by all subsequent owners of the property/real estate. If you are thinking of buying a home, it is necessary to obtain a copy of the deed restriction from the seller/realtor. You may find some deeds overly restrictive, which may affect the quality of living.

You also have the option of obtaining a copy from your respective county’s courthouse. When you are buying the property, you have to follow the obligations mentioned; and when you are selling the property, you have to make sure that the property buyer follows them carefully. If the home buyer is thinking about removing such restrictions, he should get them released from the parties, who enforced them initially.

Deed restrictions are written agreements that are drafted for the purpose of maintaining the quality and value of the property. However, the maker should consider, if the living conditions of the real estate would be appropriate after the restrictions are enforced. If you have any doubts, it is recommended that you get in touch with a real estate agent, who will explain to you all the details regarding the same.

What is a Bargain and Sale Deed?

A deed, as most definitions of this word will tell you, is a document which grants a right to another person. The deed document thus is an important one in matters of home buying and home selling. The deed in this case of course is drafted by the seller and grants the right of ownership to the buyer.

About Bargain and Sale Deed?

If you know what a general warranty deed is, then explaining the bargain and sale deed becomes a lot simpler. The general warranty deed protects the buyer from any problems over the property which may arise in the future. The deed grants the buyer of the property unencumbered and quiet enjoyment of the property sold to him.

The bargain and sale deed on the other hand offers no such promises. The general warranty deed is supposed to protect the buyer from any problems arising in the future. The deed without covenants can be viewed to be a lot more feasible and reasonable sort of deed because, that bit about the guarantees extending back to the property’s origins is a bit unrealistic. Who knows what the users before the current seller did with it anyway. Many times drafting the general warranty deed along with the covenants, becomes very confusing to comprehend, for both the seller as well as the buyer, hence the need for bargain and sale deed.

Protection From the Deed

The bargain and sale deed only specifies the right of ownership and associated rights to modify, resale, and all the other rights that come with ownership of property. The only things missing are the covenants which are part of a general warranty deed.

Now how does that protect the buyer from a bad title? Well, it doesn’t, unless he and the seller choose to sign a bargain and sale deed with covenants, which only can protect the buyer from the bad title as may be created by the seller. While no guarantee is given about what the previous owners did with it.

The deed is hence seen as a more realistic sort of deed for older properties, as the seller takes no guarantees for what passed before he came along. And the buyer too can understand that once the property is sold, the seller has nothing to do with it, let alone run around setting right the bad title that his forerunners may have given it.

It is easier for the seller to grant a bargain and sale deed, as he can simply wash his hands off the property once and for all. But, this may put a buyer in a position of disadvantage, should any problem come knocking, but then there really is nothing else that he can do about it anyway.

Gift Deed

As we all know, where the word ‘deed’ is involved, we are no doubt dealing with something related to property and real estate. But while this may be the most popular context of this word, a deed is an important bit of documentation where transfer of a certain right is concerned. The right of ownership, or indeed its transfer, requires every bit of documentation which it can get, and hence, deeds are more popularly seen and heard of in this context. Moving on to the issue about property, a deed is usually used to indicate that the seller is giving away his right of ownership over a property to the buyer, for certain consideration. But with a gift deed, you’re going to have to scratch out the last bit.

Explaining a Gift Deed

If you have any inkling of knowledge about the Contract Law in most countries, you will know that contracts without any consideration (cash or kind) are considered null and void, save for a few exceptions. Let us take an example to explain this slightly complex statement. When you want to get a new house, you go to a homeowner who no longer wants his, and quote a price so that the homeowner should relinquish the ownership. So this ‘consideration’ from the point of view of the seller is the cash he gets, while the consideration from your point of view is the ownership of the home. Furthermore, the contract law in most countries doesn’t recognize deals done without consideration for both parties and where there is only one benefactor.

Except in the case known as a ‘gift’. When one person ‘gifts’ his large, plush, and priceless property to another, he receives nothing in return by way of consideration or compensation. The receiver of this property pays nothing. The consideration here is said to be ‘love’, and hence, the contract stands fulfilled.

When you give your immovable asset to another person, which is, you grant your right of ownership over an immovable property to another, for no consideration, or in other words ‘for free’, the gift deed is the piece of documentation which records that. The deed shows that the buyer has received the property for no consideration, as a gift and its ownership for all practical purposes, rests with him.

The Format

A deed is a legal document, which means that it needs to follow a certain format, and can be contested in the court of law. Being a legal document, there are a few things to be kept in mind when drafting it.

The deed is drafted by the person giving the property as a gift, or the donor. It speaks of his willingness to give that specified asset away, in return for no consideration and completely out of love and affection for the person receiving the gift, or the donee. The donor’s signature is often not enough, and signatures of witnesses are essential. While the number of witnesses may vary depending on the rules of the state, normally two witnesses are enough to seal the deal. The witnesses, of course, cannot be people who have material interest in the property themselves, and as such, need to be disinterested parties that stand to gain nothing from the contents of the deed. For example, the donee cannot pose as the witness as he directly acquires the ownership as a result of the deed. Lastly, it also contains the signature of the donee signifying his acceptance.

A gift deed is basically made when deals without consideration for immovable property are made as they serve the basic purpose of establishing the transfer of the right of ownership.

What is a General Warranty Deed?

It is an important consideration for home buying and home selling, as it assures that the person you’re buying the property from is the real owner of the property, and not someone fraudulently posing as the owner. A general warranty deed is a legal document and if it is fraudulent, it can be contested in the court of law.

Definition

A deed where the grantor (or seller) guarantees that he or she holds clear title to a piece of real estate and has the legal right to sell it to you. The guarantee is not limited only to the time the grantor owned the property but extends back further to the origins of the property.

The meaning can be simplified by stating that the general warranty deed is a guarantee that the seller gives to the buyer, that he indeed owns the property and that the property does not have any lien or liabilities associated with it.

The rationale behind getting this legal document from the seller for the buyer is quite easy to understand. A lot of people can be bluffed by making a quick sale of property which is not yours, or has a substantial amount of liability attached to it. So by claiming the ownership of the property, not only does a fraudulent seller sell the house and make a tidy profit, but also he can also abscond leaving the new homeowner in a soup.

Hence more and more home buyers are careful to ensure that they receive the general warranty deed, so that they are assured that the property they purchase for residence or as investment property is free from any trouble.

Form

The deed usually contains 6 covenants or ‘promises’ which the seller makes to the buyer when selling property. These covenants can be categorized in two basic classes based on what they cover: The present covenants and the future covenants.

Present Covenants
Covenant of Seisin & Covenant of Right to Convey
Seisin means possession. These two covenants mean that the seller is in possession of the land and also has the right to sell to another party.

Covenant Against Encumbrances
With this covenant, the seller assures the buyer that there are no encumbrances or liabilities against the property.

Future Covenants
Covenant of Warranty and Covenant of Quiet Enjoyment
These two covenants are said to be future covenants as they are related to occurrences which may take place in the future. With these two covenants, the seller protects the buyer against any future troubles or claims against the property that may arise out of the past dealings of the seller.

Covenant of Further Assurances
This covenant ensures the buyer that if there is something omitted that would otherwise be required to pass on the title, he will do everything to ensure that the title is passed on to the buyer, irrespective of the omission.

If you go through sample deeds, you will see that they need to be notarized and need to be signed in the presence of witness. The deed is a legal document so you would perhaps like to seek the help of a lawyer to draft it.