Warranty Deed Agreement

A Brief Introduction About the Warranty Deed Agreement

What is a Warranty Deed Agreement? A warranty deed is a legal document used in the real estate and instills confidence in the buyer that the seller is the rightful owner of the property and does not have any mortgages or liens on it. The contracting parties here are the seller (or the grantor) and the buyer (or the grantee). While there are several types of warranty deeds, the general warranty deed exposes the grantor to the greatest amount of risk.

This is because a general warranty deed allows the grantor to warrant against any defects of clear title that might have existed even before he possessed the title, and that he/she is the rightful owner of the property. It might be a good plan to invest in title insurance to ensure that you’re protected against claims and liens.

The types of warranties differ based on the covenants that they make:

Special Warranty Deed: This kind of warranty deed only provides for the seller (grantor) to warrant anything that occurred during his ownership. This is also called a limited warranty deed
Statutory Warranty Deed: This Warranty deed agreement makes the same covenants as a general warranty deed, however, it differs in the way that the guarantee of a clear title is not explicit, but is implicit due to the state’s statutes.
Quit Claim Deed vs. Warranty Deed: A quitclaim deed serves the same purpose as a warranty deed – to transfer the title of a property. However, it is different because it can only be used when the property is being transferred without a sale. The quitclaim deed does not warrant that the title belongs to the grantor. Instead, it establishes that even if the grantor had ownership of the property, he no longer lays claim to it post the signing of the deed. The degree of protection is much lesser in this case. This deed also prevents the grantor from having any future interests in the property.

Who Takes the Warranty Deed Agreement? – People Involved

You would need to enter into a warranty deed if:

You are the owner of a property whose title you wish to transfer while making warrants that the property belongs to you and that you are willing to transfer its possession and ownership to the grantee.
You are the purchaser of a property and need to ensure that the property has a clear title and that the grantor owns the property.

The contracting parties here are the grantor and the grantee.

Purpose of the Warranty Deed Agreement – Why Do You Need It?

The purpose of a warranty deed is to:

To make warrants that the property is owned by the grantor.
To make warrants that the grantor wishes to transfer the title of the property to the grantee.
Establish the relationship between the contracting parties as a grantor and grantee.
Specify the terms relating to the property and the covenants, including the addresses of the grantor and the grantee, the address of the property, the tax parcel number of the property.
Protect the rights of the parties and making the legal resolution of a dispute possible.

Contents of the Warranty Deed Agreement – Inclusions

An effectively drafted Warranty Deed Agreement must be detailed and include the following terms:

Effective Date: This mentions the date on which the agreement becomes effective. It is a standard yet critical clause that must be included.
Parties to Contract: This clause identifies the parties to the contract, that is, the grantor and grantee. It must mention their names and addresses.
Legal Description: It is very important to include the legal description of the property that matches the records of the county or parish, either within the document or as an affidavit.
Grantor: The grantor makes covenants to the grantee as per the deed. This identifies the grantor, who can be a person, persons, a business, or a trustee. Include the address of the grantor.
Grantee: The grantee is the one to whom the grantor makes covenants to as pert the deed. This identifies the grantee who can be a person, persons, a business, or a trustee. Include the name and address of the grantee.
Consideration: This clause mentions the amount for which the title of the property is being transferred. If there is no money exchange involved, the deed must include a nominal value, such as $1.00.
Mineral Rights: This clause allows the grantor to reserve his right to the oil, gas, and other minerals on the property. If you include this clause, make sure to mention the percentage of the mineral rights that the grantor wants to reserve.
Life Estate: This clause allows the grantor to live on the property until he dies. The legal title on the property is transferred to the grantee as soon as the deed is signed.
Governing Jurisdiction: This clause specifies the jurisdiction that will govern any disputes that may arise out of the agreement.
State-specific Laws: Include any clauses and terms that may be required for compliance with state-specific laws and legislation.

How to Draft the Warranty Deed Agreement?

The procedure to draft a warranty deed:

Mention the date of the agreement, that is, the date on which the agreement will come into effect.
Recognize the contracting parties with their names and addresses.
Establish the relationship between the parties.
Specify the name of the grantor and his address.
Specify the name of the grantee and his address.
Mention the address of the property with the legal description that matches the county or parish’s records.
Mention the consideration (either nominal or actual) being paid for the property.
The agreement needs to state the name of the jurisdiction that will govern the document and any disputes that arise from it.
Make covenants to the grantee to warrant that:
Have the parties to the contract sign it to signify acceptance of terms.

Make sure that the agreement complies with local, state, and federal laws. Also, make the terms are simple, explicit, and void of ambiguity.

Negotiation Strategy

The terms of the contract need to be negotiated such that it is mutually beneficial and agreeable to both parties. This will instill confidence and good faith in the parties, reducing the chances of disagreement or dissatisfaction, which often lead to disputes. The contract should not unfairly benefit one party at the expense of the other unless agreed upon. The parties must make sure that they negotiate according to the established procedures for all parties to get the highest return on their investment equitably.

Benefits & Drawbacks of the Warranty Deed Agreement

The benefits of having a warranty deed:

Instills confidence in the buyer (grantee) that the grantor genuinely owns the property
It makes it easier to sell a property
Ensures that there are no defects in the title of the property.
Safeguards the legal interests of both parties.
Allows the grantor to reserve rights over oil, gas, minerals, when transferring the property.
Allows the grantor to use the property as a life estate while transferring the title.
Makes legal recourse an option, should a dispute arise.
Gives legal transaction validity.

The drawbacks of having a warranty deed:

The legal costs of drafting the agreement must be borne by one or both of the parties.
Negotiations can take time
General warranty deeds can expose the grantor to a lot of risks.

What Happens in Case of Violation?

If the terms of the agreement are breached by either of the parties, the other may be able to go to court. However, the resolution of disputes using conventional dispute resolution methods is not preferred. Ideally, a dispute should be settled internally amicably. However, this is often not possible, making arbitration and alternative dispute resolution methods more preferable(1). While going to court is always technically an option, it should be the last resort in terms of dispute resolution. Resolving an issue internally is much less expensive to both parties than going to court over it.

Warranty Deed Agreements are documents that can effectively guarantee that the property is owned by the grantor and that he has the right to transfer titles. Further, it also allows the grantor to warrant that the title to the property is good and that he assures there is no defect to it. The document contains clauses that identify the grantor and the grantee, the address of the property, the tax parcel number, and reserve rights such as mineral rights and life estate rights.