If you are considering purchasing a piece of property as an investment, it’s important to take into consideration the type of deed the seller is going to ask you to sign. Different deeds come with different levels of personal liability and protection. Knowing what you’re getting into can help you to avoid a potential lawsuit down the road.
The three most common types of deeds are general warranty deeds, special warranty deeds and quitclaim deeds.
General warranty deeds
A general warranty deed will provide you with the greatest amount of protection. It comes with certain legal covenants that the seller is making for you.
When a seller signs a general warranty deed, they are promising that they own the property, they have the right to sell it to you and that there aren’t any undisclosed problems with title. They are also promising that they will defend your right to the property if a dispute arises with a third property.
Special warranty deeds
A special warranty deed is similar to a general warranty deed, but slightly more limited. It only promises that no problems arose in the time that the seller owned the property – it doesn’t apply to any issue that a previous owner may have caused.
A quitclaim deed is the riskiest kind of deed for a buyer. It’s a sort of “as is” deed, that only grants you whatever rights in the property that the seller may have. It doesn’t give you any guarantees as to competing claims, easements or any other type of problem that can arise.
It’s important to know what each type of deed entails before you sign them. That way you won’t be taken by surprise if a problem arises down the road.