In real estate transactions, the transfer of property rights is crucial. Using incorrect documents can potentially leave you in a vulnerable and financially challenging situation. Whether you are transferring or purchasing property, understanding deeds is essential.
Grant deeds are sometimes used in real estate transactions. But is it the most appropriate type of deed? Does using it ensure clear property rights?
A grant deed, also known as a special or limited warranty deed, is a legal document used to transfer real estate between a grantor (previous owner) and a grantee (new owner).
The grant deed guarantees that the grantor has not transferred the property to anyone else and that during the grantor’s ownership, the property has not been mortgaged unless specified otherwise in the deed.
However, the grantor does not guarantee the absence of any defects in the property rights before their purchase or ownership of the property. In other words, the grant deed does not provide assurance or promise to protect property rights transfer. It only signifies that the property has not been sold or transferred to others during the seller’s ownership, with no existing claims against the property, mortgages, unpaid property taxes, or other encumbrances.
It is important to note that these assurances apply only to the previous owner or the person selling the property to you. As a result, the grantee (new owner) may need to address any issues left unresolved by the grantor, such as liens, zoning issues, or property claims, which existed before the grantor’s ownership. This might lead to additional costs and potential long-term legal disputes for the grantee.
Grant deeds provide a certain level of protection falling between a quitclaim deed and a warranty deed.
Quitclaim deeds are commonly used for transfers between family members or to correct errors in warranty deeds. However, they do not offer any protection to the grantee, potentially leaving property rights unclear.
Transfers through quitclaim deeds may overlook critical information disclosure, and the grantor holds no liability for damages resulting from undisclosed information.
A warranty deed—or a special warranty deed—provides more protection to the purchaser. In a warranty deed, the grantor assures that they have valid ownership rights to the property without any claims, liens, or other encumbrances.
If the grantor makes false statements about their ownership, they may face legal action.
Given the property rights assurance provided by a warranty deed, it offers greater protection to the grantee, making it the preferred choice in most typical real estate transactions.
The use of grant deeds depends on the type of property transfer. They are often used in tax sales and foreclosures, among other scenarios.
Other uses include adding or removing names from property ownership, transferring property to a trust, transferring property ownership between business entities and individuals, or vice versa.
Divorcing couples might also use grant deeds in interspousal transfers, transferring property ownership between spouses.
The specific requirements and format of grant deeds depend on state laws. However, some essential contents that must be included in a grant deed are the date, full names of the grantor and grantee, property description, granting clause ensuring the grantor’s right to sell the property, consideration details, grantor’s signature, witness signatures, or notary confirmation depending on state regulations.
In addition to the above contents, a warranty deed must include a statement detailing the warranties or guarantees provided.
The use of grant deeds offers advantages such as clear property transfers, basic guarantees of rightful ownership, and lower costs in certain situations. However, the protection provided by grant deeds is limited, as they only assure that the grantor has not transferred property to others or created mortgages but do not guarantee the absence of pre-existing issues that might lead to legal problems in the future for the grantee.
As there is no assurance of a property being free of all issues, buyers using grant deeds might need to purchase title insurance, incurring additional costs. Consulting a real estate attorney is advisable to understand the legal implications of using grant deeds.
While grant deeds have advantages, there is a risk of future claims on ownership by third parties. In some cases, grant deeds might be a reasonable choice, but if possible, using warranty deeds should be considered. Additionally, seeking advice from a real estate attorney for professional guidance is recommended.