The Role of Grant Deed in Real Estate

Buying and selling a house requires a lot of documentation, paperwork, and different warranties that protect either or both parties involved. Several types of deeds can be included, but today we are going to focus on grant deeds.

A grant deed is a legal document that takes care of property transfer by guarding the safety of the buyer or the grantee. The seller is signing a grant deed as a way to show that there are no problems with the property title.

In this article, we’ll go in-depth about grant deeds, what they include, when to use them, and how they differ from other deeds.

What is a Grant Deed?

A grant deed presents a legal guarantee for the buyer of the real property that the title is without any potential liabilities that might get transferred to their name. This document promises that the property hasn’t already been transferred or sold to another buyer, and that there haven’t been any issues with the title, as far as the seller knows.

Those issues can include things like another person with full or part-ownership, property claim issues, liens and loans against the property, tax liens, etc. Therefore, a grant deed guarantees none of these issues came up upon title search.

Essentially, a grant deed is a document that proves a title transfer, while giving a level of protection to the buyer, and removing the future liability of the seller. Once the grant deed is signed, and issues with the title somehow do pop up - it is entirely up to the new owner to deal with that problem.

The grant deed recognizes two different actors in the real estate transaction of a title. A seller or a current owner is called a grantor, while the buyer or the future owner is called a grantee. If the real property has multiple owners, all of them need to sign the grant deed for it to be valid during a property purchase.

When Are Grant Deeds Used?

Deeds in general are used as proof of title transfer, but not every title deed is the same. Grant deeds, as explained, offer one layer of protection during the sale. If any future issues arise, the new owner has to resolve them.

This is why they are mostly used when purchasing a property in a tax sale or foreclosure auction. A buyer has a chance of avoiding the cost of a purchase agreement and there is a big chance that the current owner had to resolve title issues beforehand, anyhow.

However, it is important to note that some other types of dees offer more legal layers of protection in case a problem with the title arises.

What Does a Grant Deed Include?

For a grant deed to be binding, it needs to exist in a physical form. Grant deeds, like other deeds, include grantor(s) and grantee’s personal information, date of sale, legal description of the real property, and notary public acknowledgment. In addition to that, there needs to be a grant deed warranty statement.

A warranty statement in a grant deed can be an explicit statement, as such “The Grantor warrants that the property is free and clear from all liens and encumbrances…” On the other hand, some states take the grant deed form in and of itself as a warranty statement.

Each state has its own requirements when it comes to a grant deed form, and not all of them obligate you to hire a notary. Nevertheless, it is always advisable to use a legal witness in the matter of a grant deed, because even though it is not obligated by state law, you might have trouble with it in the future.

Grant Deed Vs. Warranty Deed

A grant deed is a good way to secure the title transaction, however, there are safer ways to do it. Warranty deeds are the ultimate layer of protection for the buyer. They guarantee the current owner’s responsibility to the title even when the sale is done, meaning - if any issues from before the transfer arise, the grantors will be liable.

There are two types of warranty deeds, which differ slightly from one another. There is a general warranty that guarantees that there are no title issues with the property whatsoever. Meaning that there is a clear path of title transitions since the house was originally built.

On the other hand, a special warranty deed is a guarantee that the seller has no knowledge of any title issues, tax liens, or other ownership problems since he/she became an owner. They are accepting the responsibility for the problems if they originated during that timeframe.

A general warranty is the best way to protect yourself as a buyer, but if the property is old or has multiple owners, a seller will not be quick to sign it. A special warranty is a compromise between a grant deed and a general warranty.

A warranty deed form has all the general information of a deed, with an addition of a general or special warranty statement. The warranty deed form should also be notarized and signed by a witness.

Grant Deed Vs. Quitclaim Deed

If we were to measure the level of protection that a grant deed offers against a quitclaim deed - grant deed would win. Quitclaim deeds are a basic title transaction proof, that guarantees nothing but the mere transaction.

Because these types of deeds are so loose with the liability, they are usually used only in interfamily title transactions. When a father wants to give a family house to his child, they will sign a quitclaim deed. Additionally, they are used in wills and testaments.

Quitclaim deeds leave the new owner with the property, title, and everything that is attached to it. There could be liens, unpaid taxes, or other family members with a part-ownership. None of those issues are disclaimed on the quitclaim deed.

Other Types of Deeds

There are deeds in real estate in connection to the title transfer but different from these standard deeds which we have already explained in this article. Such documents have their intricate roles in buying, selling, refinancing, and other real estate transactions, and it can be confusing to differentiate them.

While a grant deed offers a guarantee that the title of the real property is clean, these next types of deeds are documents that put a title in some kind of clinging situation.

A deed of trust is a title transfer document and concept that uses a third party as a guarantee for the home purchase. A deed of trust does not assure protection to the buyer, but to the seller and his assets.

Using a deed of trust, a borrower (buyer) is agreeing to put the legal title in trust of the impartial third party until they pay off a loan. This document, thereby, grants the new owner just the equitable title, which allows them to occupy the property and earn equity on it, rather than being a legal owner.

A mortgage deed is a deed of trust alternative, which is conducted between a lender and a borrower. The only difference between the two is visible only if it comes to starting a foreclosure process. A deed of trust puts the responsibility of foreclosure in the hands of an impartial third party, whereas the mortgage deed puts it in the hands of the lender.

A deed in lieu of foreclosure is a legal document that struggling homeowners use when all other options are exhausted and the foreclosure awaits. Instead of entering the foreclosure process, they sign off their title ownership in favor of their lender. By losing their right to the property, they are relieved from their debt and don’t have to go through foreclosure. Meanwhile, the lender doesn’t have to lose money in the process.

Grant Deed in California

Grant deed in California must meet all California laws, including a legal description and a statement of consideration, but it does not include a written warranty, as it is implied that the document itself is a warranty.

The warranty of title provided in California is the same as in other states, as it is legal protection for the buyer just until the purchase is done.

The document is binding in California even if it is not notarized, but it is advised to notarize and record every grant deed you cosign, as to avoid potential issues. Take your document to your county recorder, and have it in public records, just in case.

Is Grant Deed Unfavorable for the Seller?

Grant deeds are less risky for the seller than the warranty deed, but they still present liability in case something comes up upon title search. Grant deed’s biggest disadvantage against the seller is the fact that it’s usually used when the buyer can acquire the property by paying it much less than the market value.

That’s why we recommend contacting SleeveUp Homes before you get to the point of no return. If you are going to lose the ownership anyway, might as well earn a good buck off of it.

We offer at least 10,000 more than others would, and we do it for the property as-is. Do you know what this means? No need to paint, repair, or spend any money on reparations. Request an offer and see it for yourself.

Author:

Cesar Gomez , Broker /

Cesar has worked as a real estate agent and broker in the southern California region since 2013.

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