What is a guarantee deed? – Councilor Forbes
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There is a lot at stake when buying a home. After all, it’s probably the biggest purchase you’ll ever make. The last thing you want is to close your dream home so that a bank will come knocking on the door later asking who has the legal right to the property. This is where a guarantee act comes in.
This document may seem like just one more sheet in your mortgage paper pile, but it’s an important contract that protects your home from future claims. Read on to find out what it is and how it works.
What is a guarantee deed?
In a real estate transaction, there is a settlor and a beneficiary. They can be individuals or companies. A deed of guarantee is a real estate document that guarantees – or promises – that the grantor (seller) owns the property free of charge and that there are no outstanding mortgages, liens, judgments or other charges. In other words, the seller has the power to transfer the property rights to the assignee (buyer).
How the guarantee deeds work
A deed of guarantee is not proof that you now own the property. Rather, it means that the previous owner can guarantee that no one else owns the property or owes money for the property. You do not actually own the property until title is transferred to you.
The guarantee deed will contain details such as the address of the property, the parcel number, a legal description of the property, the date of the transaction and the names and addresses of the parties involved. To be legally binding, the warranty deed must be notarized and filed with the city or county office to retain real estate registers. It is given to the concessionaire at the closing of the real estate.
Types of guarantee deeds
There are in fact two types of guarantee deeds. Here’s a closer look at how each works.
General guarantee deed
A general warranty deed offers the highest level of protection to the buyer. In case of violation of the general guarantee act, the seller is responsible, even if it happened without his knowledge or at a time when he was not the owner of the good.
According to Legal Zoom, a general guarantee deed guarantees that:
- The grantor is the legal owner of the property and has the legal right to transfer it.
- There is no current mortgage, privileges or other claims against property by any creditor.
- The licensor has a clear title. In the event of breach of warranty, the dealer is entitled to compensation from the licensor.
- The assignor intends to transfer the asset to the assignee.
Special guarantee act
A special guarantee deed works the same way as a general guarantee deed, except that it only applies for a certain period. Basically, the special guarantee deed promises that the current seller holds the title to the property and that there has been no claim against him while he was the owner.
The special guarantee deed does not protect against claims prior to the time the seller received the title. These types of guarantee deeds are the most common in commercial real estate transactions.
That is why title insurance is important for protection against potential liens and other claims. The title company will conduct research prior to the final sale to ensure there is no possible infringement before ownership passes to the buyer, whether using a general or special warranty deed.
Deed of concession
In some cases, a landowner can use a deed of concession instead of a deed of guarantee. The deed of concession offers essentially the same protections: no one else has a right to the land, and there are no privileges or restrictions. However, the only thing that a deed of concession does not protect against are third party claims.
How to obtain a deed of guarantee
A buyer usually needs a security deed when trying to get a mortgage or title insurance. Keep in mind, however, that not all real estate transfers involve an actual purchase, such as moving a house from one family member to another.
It’s a good idea to get a warranty deed if:
- You are buying or selling a property and want to be insured against title issues.
- You finalize the purchase of real estate with an individual.
- You transfer ownership of property to a trust.
- You own a business and want to buy or sell real estate.
If you are the buyer, you can require a deed of guarantee for the transaction to take place. A real estate lawyer can help with that.
As a seller, you can find many sample warranty documents online or through the office of a local real estate agent. Remember that it must be signed by both parties, notarized and filed with the county clerk’s office to be official. Usually, the lender will send out all mortgage documents to be registered, and the registration fee is built into the loan closing costs. The recipient will receive the original document once it has been registered, and the donor will obtain a copy for their records.
Deed of waiver vs. Deed of guarantee
Although a waiver deed is similar to a warranty deed, it is not interchangeable. A waiver deed only indicates that the grantor is waiving their legal interest in a property. It does not promise that other people or entities are also interested in it.
There is not much protection for the beneficiary with a waiver deed, so it is generally used in situations where both parties have already established trust, such as the transfer of property between family members.
Deed of trust or deed of guarantee
Another document that you might confuse with the warranty document is the trust deed.
If you take out a loan to finance the purchase of a home, you will sign either a mortgage contract or a trust deed (but not both). The trust deed secures the real estate transaction and appoints a third party (trustee) to handle the foreclosure process if you do not repay your loan. Essentially, it states that the trustee holds legal title to your property until you have paid it off according to the terms of your loan.