Caveat Emptor: What’s the Difference Between a Warranty Deed and Quitclaim Deed?

You just bought a new home! Congratulations! But how do you know that you are the true owner of that property and home? How can you be sure no one is going to show up one day and claim true ownership?

You know this because you obtained a deed when you bought the property. you didn’t just obtain a deed though, you obtained the right deed. Knowing the difference between a warranty deed and quitclaim deed can ensure you get your money’s worth when you buy real estate.

Not sure what the difference is? That’s ok, we are going to explain their differences and what they mean for you here in South Carolina.

Difference Between a Warranty Deed and Quitclaim Deed

When you are at your closing is not the time to determine what type of deed you will receive from the seller. Depending on the property you intend to buy, and who you are going to buy it from, will dictate what type of deed you will want.

What Is a Deed?

The best place to start is with what a deed actually is. This important document will contain the legal description of the property. It definitively states who the seller is and who the buyer is. They are also known as the grantor and grantee.

There is some key information that must be included within the deed. It must state the true address, the coordinates, the size and shape, and previous and new owner.

There are a couple different types of deeds that you might hear about. There are warranty deeds, special warranty deeds, quitclaim deeds, and deeds of trust. We are going to go over two common kinds here, warranty and quitclaim.

Quitclaim Deed

Do you wish to transfer property between family members or friends? These types of transfers are more casual and trusting than those between strangers.

When the transfer of property is not a traditional sale, then you can probably use a quitclaim deed. Here are some common situations when a quitclaim deed is commonly used.

• The property is a gift
• Transfer of property through a will
• Transfer of property from one spouse to another during divorce
• Transfer of property from parent to child or vice versa
• A traditional sale where the seller is not confident of the property placement or boundaries

There is a huge amount of trust placed in the grantor by the grantee when accepting a quitclaim deed. The grantee has no recourse against the grantor if any defect in the title should arise.

You have the least amount of protection with a quitclaim deed. You will only get the same amount of interest in the property that the grantor has.

That means if a third party proves they are the rightful owner, and the grantor has no interest, then neither do you. It also means that if the property has a mortgage or lien, that will remain secured on the property through the transfer.

One caveat to this transfer is that the transfer will remain liable for the mortgage. So if they transfer the property, and the grantee decides to stop paying or sell the property, the grantor is liable.

There is also no recourse against the grantee for them no longer paying.

Warranty Deed

Some real estate transaction requires the greatest level of security. For example, you intend to buy your new family home from a stranger.

You don’t know the other person, so you need some security in return for plunking down your hard earned money. You don’t want to buy a property only to find out someone else owns it, or that it is encumbered by a lien.

A warranty deed will provide you with the assurance that the property you intend to buy is free and clear. Your deed comes with the following warranties:

• The grantor will do what is necessary to deliver clear title to the grantee
• The title is going to endure against any third party claims
• The grantor is the rightful owner
• The granter has a legal right to transfer the property
• The property is free of all creditor claims, liens, or mortgages

If a problem arises with the title to your property then you have recourse against the seller. It is the grantor’s responsibility to cure any claims to the title.

This is a huge responsibility to place on the seller. As the can be held liable for problems with the title that they aren’t aware of.

Because of this, title insurance is a common practice in traditional property transfers. The title company will do a thorough search of the title and flush out any possible breaches in the chain of title.

Warranty Deed Versus Deed of Trust in South Carolina Real Estate

Understanding the legal documents involved in a real estate transaction is crucial for both buyers and sellers. Two terms that often cause confusion are the “warranty deed” and the “deed of trust.” While they both have the word “deed” in their names, they serve entirely different purposes. In South Carolina, this distinction is particularly important because one is a standard instrument for transferring property ownership, while the other is not used for residential financing.

The Purpose and Function of a Warranty Deed

A warranty deed is a legal document used to transfer the ownership of real property from one party (the grantor) to another (the grantee). This is the instrument that officially conveys the title of the property. What makes a warranty deed unique is the comprehensive set of guarantees, or “warranties,” that the grantor provides to the grantee.

The most common form is a general warranty deed, which offers the highest level of protection to the buyer. It contains several key covenants, including:

• Covenant of Seisin: A promise that the grantor actually owns the property being conveyed.
• Covenant against Encumbrances: A promise that the property is free from any liens, mortgages, or other claims that were not disclosed to the buyer.
• Covenant of Quiet Enjoyment: A guarantee that the buyer’s title will be defended against any future challenges from third parties.
• Covenant of Warranty: A promise that the grantor will protect the grantee’s title against any claims.

A special warranty deed offers a lesser degree of protection, guaranteeing the title only against defects that may have arisen during the grantor’s period of ownership. In South Carolina, the general warranty deed is the most commonly used instrument for residential and commercial property sales, as it provides peace of mind to the buyer.

The Purpose and Function of a Deed of Trust

A deed of trust is not an instrument of ownership transfer but rather a tool used to secure a real estate loan. It involves three parties: the borrower (trustor), the lender (beneficiary), and a neutral third-party (the trustee). The borrower grants the deed of trust to the trustee, who holds the legal title to the property in trust for the lender. The trustee holds this title until the loan is fully paid off, at which point the title is reconveyed to the borrower.

The primary reason many states use a deed of trust is to enable a quicker, non-judicial foreclosure process. If the borrower defaults on the loan, the trustee can initiate a foreclosure sale without needing to go to court. This is a streamlined alternative to the judicial foreclosure process required by a traditional mortgage.

The South Carolina Context: The Mortgage

This brings us to the key distinction for South Carolina. While a warranty deed is used for ownership transfer, the state does not use deeds of trust as the primary security instrument for residential real estate. Instead, South Carolina is a “mortgage” state.

In a mortgage transaction, there are only two parties: the borrower (mortgagor) and the lender (mortgagee). The borrower grants the lender a lien on the property, which serves as security for the loan. The borrower retains the legal title and ownership of the property. If a default occurs, the lender must go through a judicial foreclosure process, which means they have to file a lawsuit in court to force a sale of the property to repay the debt. This process is generally more time-consuming than a non-judicial foreclosure.

Summary: A Side-by-Side Comparison

A warranty deed and a deed of trust serve completely different functions in a real estate transaction. The warranty deed is the document that makes you the owner of a property, backed by specific guarantees from the previous owner. A deed of trust, conversely, is a financing instrument used in some states to secure a loan. For real estate transactions in South Carolina, the process involves two distinct documents: a warranty deed to transfer ownership from the seller to the buyer, and a mortgage to create a lien on the property, securing the loan from the lender.

What Deed Works for Your Needs?

Knowing the difference between a warranty deed and quitclaim deed will help you know what you need for your transfer of property. Using the right deed will ensure that your interests are protected.

If you simply need to put the property in a loved one’s name, then a quitclaim deed should suffice. But if you are involved in a traditional real estate sale, then it is in your best interest to obtain a warranty deed.

Just remember that there are pros and cons to both. So consider them both no matter if you are the buyer or the seller of the property.

Contact our office today for a free consultation and one of our attorneys will speak with you about your legal needs.