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 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.