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Understanding the Various Types of Warranty Deeds

Deeds are legal documents that transfer ownership of property from one person to another. There are, however, a variety of different types of warranty deeds, which are used for different purposes. Following is a list of the most common reasons and types and examples of when these would be used:

  • General Warranty Deed: the most common and most used Warranty Deed provides the buyer with the greatest protection. In this deed, the seller will warrant and defend against all claims whomsoever, which means if there are any issues with the marketability of the title, the buyer could hold the seller liable. We had a closing a couple of years ago where the buyer was purchasing a property out of foreclosure and wanted the seller to sign a General Warranty Deed. While these are the most common type of deed, getting the seller to sign a General Warranty Deed out of foreclosure is highly unlikely.
  • Special or Limited Warranty Deed: these types of Warranty Deeds are most commonly used in a foreclosure. The seller will warrant and defend against all claims, but only those claims by and through the name of the seller. There is no warranty given for anything that happened prior to the seller taking title, and the seller would not be held liable.
  • Quitclaim Deed: this type of deed is common in divorces and conveying a non-vested spouse interest in a property. There is no warranty given, this simply conveys any right or title that this person may have in a property to another person. In Tennessee, you may have a spouse that takes title to a property before he or she is married.  Upon marriage that spouse will have certain homestead rights on the property that is used as their primary residence. Upon selling that property, it would be customary to include the non-vested spouse on the Warranty Deed to Quitclaim and convey whatever interest they may have.
  • Deed Creating a Tenancy by the Entireties: In this type of Deed, the spouse is adding the other spouse on the vesting of the title and includes survivorship rights, which state if one of the spouses should pass away, the remaining interest in the property is vested immediately to the surviving spouse. While this is not recognized in every state, in Tennessee, property acquired during the marriage is assumed to be vested as tenants by the entireties. The question that comes up relates to property acquired before the marriage. Property acquired before the marriage is assumed to be vested as joint tenants. What about property acquired together by non-married individuals? Property acquired by non-married individuals is assumed to be vested as joint tenants. Upon the death of a joint tenant, the person’s interest would go to their heirs, unless there are rights of survivorship. Joint tenants with full rights of survivorship (non-married) is the same as tenants by the entireties (married), which mean if any tenants passes away, the remaining interest would pass to the surviving tenant.
  • Deed in Lieu of Foreclosure: In this type of Deed, the owner of the property is giving the property back to a lender in order to satisfy the amount owed. The foreclosure can be long and drawn out so one advantage is that it would shorten the time to get the property sold. However, this can be problematic for the lender, if there are junior liens tied to the property, the lender would not want to assume the liability for these liens.

To wrap it up, the transfer of an owner’s title is made by a deed. A number of vital elements must be contained within the deed in order for it to be legally operative. Different deeds provide various levels of protection to the grantee. Since deeds are important legal documents that affect ownership interests and rights, it’s always a good idea to consult a qualified real estate attorney.

July 24, 2017

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