The General Warranty Deed

The general warranty deed offers the grantee the broadest title protection of any deed in a real estate transaction. It offers greater protection than limited (special) warranty deed, or the quit claim deed (which offers the least protection).

During my childhood in a developing country, buyers of real estate were often defrauded by people who collected large sums of money to "sell" houses they didn't really own. These fake sellers would then disappear without a trace as soon as money changed hands, leaving the unwitting buyers and bewildered legitimate property owners to resolve the mess.

A deed is the legal document used to transfer ownership rights in an asset from one party to another. Types of deeds include

• General Warranty Deed
• Limited or Special Warranty Deed
• Quit Claim Deed

When title (ownership) is conveyed with a general warranty deed, the grantor (seller) of the property is essentially saying,

"I warrant that I have title and possession of this property, that there are no undisclosed encumbrances on that title, and that I have the right to transfer said title and possession to you (grantee)"

Conveyance of title with a general(full) warranty deed also usually implies that the grantor is accepting the responsibility to protect the grantee's interest should some third party pop out of the woodwork and claim that they are the "rightful owner".

While savvy real estate investors prefer that title be granted to them with a warranty deed, creative real estate investors who financing with no money down creative financing or other risk-protected techniques may be open to receiving quit claim deeds from property sellers.

Why?

An active real estate investor using creative real estate financing techniques to take over property may have very little at risk if the deal goes south, and may feel okay with a quit claim deed. Furthermore, no real estate investor would put money or peace of mind at risk by closing a deal without backing things up with a proper title search, and the purchase of title insurance (at closing).

The title search is intended to unearth realities that could pose an unwelcome expense or obstacle when it’s time for settlement. A few years ago, I dealt with a property seller who had bought her property from a relative without running a title search or purchasing title insurance.

When I put the property under contract intending to assign it my wholesale real estate buyer, our title search brought up all kinds of entanglements with the deed which were not resolved till my settlement period expired. What were some of the problems?

Her relative, who she bought the property from, never recorded the deed transfer...

Fortunately, I was working with an excellent title attorney who was able to resolve the title issues, and I eventually wholesaled the property to another buyer.

If you're a creative real estate investor like most visitors to this site, you may be tempted to think that you should go out of your way to insist on getting title in a general warranty deed...that would be a mistake. Many investors have made a fortune using such techniques as having seller transfer title to them with a quit claim deed.