What Is a Grant Deed and How Does It Work?

If you’re about to engage in a real estate transaction, you need to gain a basic knowledge of deeds. And if you’re transferring or acquiring title to real property, you need to understand the different types of deeds and how you can benefit from them. This includes a grant deed, which is commonly used when the property is being obtained through a tax or foreclosure sale.

Grant deeds, also known as “California grant deeds” because they are typically used in this state, are legal documents that offer unique protections to buyers. It’s an insurance policy the property seller provides to the buyer to ensure the buyer has no ethical or financial liability for future challenges to the property’s ownership.

What Is a Deed?

A deed refers to a legal document that transfers title to real property from one party to the other. The party can be a person, a business entity, an estate, or a trust. The party transferring title is called the transferor or the grantor, and the party receiving title is called the transferee or the grantee.

There are two primary types of deeds:

• Quitclaim deeds: With quitclaim deeds, the grantee has no guarantee that the grantor has an interest in the property. If the grantor doesn’t have title to the property or there are issues with the title, the grantee has no legal recourse against the transferor.
• Warranty deeds: With this type of deeds, including a grant deed, the grantor provides the grantee with one or more legally enforceable warranties or assurances regarding the title to the property.

Warranty deeds may include exceptions for specific limitations on the property, such as a mortgage, property taxes owed, easements, and subdivision deed restrictions. That means that if any such exceptions are stated in the deed, they won’t be subject to warranties.

Note that there are two types of warranty deeds:

1. General warranty deeds: General warranty deeds guarantee that there are no undisclosed title issues with the property. This also relates to the time before the grantor obtained the property. Moreover, it required the transferor to pay any legal expenses that may be incurred if a title issue emerges. Essentially, the grantor promises that there are no undisclosed title problems and that they will pay to defend the title in court. That said, a general warranty deed offers the transferee all the protection they can get.
2. Grant deeds: This type of deed is also known as a limited warranty deed or a special warranty deed, and it gives the grantee some, but not all, of the assurances of a general warranty deed. The typical grant deed makes two warranties. The first warranty is that the transferor hasn’t transferred the property to anyone else, and the second one is that there are no title issues that emerged during the time the grantor has held the title. However, a grant deed doesn’t give warranties as to any claims that may have occurred before the transferor obtained title and doesn’t promise to pay legal costs of defending any title claims.

What Are the Uses of Deeds?

The type of deed used depends on the nature of the property transfer and the relationship between the grantor and grantee.

Quitclaim deeds make no guarantee to the buyer that there are no liens on the property. That means when a buyer receives this type of deed on a property, he takes a significant risk compared to other types of deeds. That said, quitclaim deeds are typically used in transfers between family members, into or out of the transferor's trust or business, or to correct a mistake in a warranty deed.

General warranty deeds are considered the best property deeds because this type of deed provides the most protection. That’s why these deeds are often used when the grantor and grantee don’t know each other and money is changing hands. Note that a general warranty deed is almost always necessary when the buyer is getting a mortgage to finance the purchase.

Grant deeds are typically used when the grantee is obtaining title in a tax or foreclosure sale. It can be viewed as a middle ground, providing the grantee a level of protection somewhere between a general warranty deed and a quitclaim deed.

How Does a Grant Deed Work?

The purpose of a deed is to offer legal protection to buyers of real property. Grant deeds are often used when a grantee is obtaining real property in a foreclosure or tax sale. That said, they may also be held in escrow during a real estate transaction.

With grant deeds, grantees benefit from buying property below market value, and grantors risk less by making fewer guarantees. That’s why, for buyers, they are considered more favorable than quitclaim deeds but less advantageous than general warranty deeds.

A grant deed includes:

• Names of grantor and grantee
• Date of sale
• Property description
• Signature of grantor
• Notary public acknowledgment
• Warranty statements

Does a Grant Deed Need to Be Notarized?

A grant deed is a legal document that governs what protection a buyer gets when a seller transfers ownership of the real estate, and it only needs to be notarized following state law. So, check your state legislature’s website or talk to a real estate lawyer in your area to discover whether a grant deed needs to be notarized in your state or not.

Getting a grant deed notarized is a vital step to making this document legally binding because a notary public must be physically present while both parties sign the grant deed to display their seal that certifies that the signatures are legitimate. You can think of a notary as a witness with legal permission to bear witness to legal binging concerns.

How to Obtain a Grant Deed

Getting a grant deed isn’t as complicated as many might think. The first step is to find a property you want to buy. You can do this by checking your local newspaper’s classified ads, searching the web, or asking your friends, family, and acquaintances.

Foreclosure or tax sales are some of the most common exchanges that involve grant deeds. These types of sales are favorable because you have the opportunity to save money on the purchase agreement as such sales often occur at auctions. So, it may be a good idea to check your classified ads search or reach out to your local government agency to find a property auction near you. Real estate agents may also help.

You can only request a grant deed in the negotiations phase of a sale. Note that while grant deeds provide some level of protection, they may not always be the best alternative for the transfer of ownership of the real estate. General warranty deeds protect the buyer more and are the best option if you’re looking to buy a property.

However, in some cases, a general warranty deed isn’t on the table nor is needed. And if you want additional protection when getting a grant deed, consider performing a deed search to get more insight into the property you’re interested in before closing the deal.

Protect Yourself During a Real Estate Transaction

After reading this article, you have a good idea of what a grant deed is and what protections it offers to buyers.

With the grant deed, you have a guarantee that the grantor hasn’t transferred the property to someone else and that there are no title problems that emerged during the time the grantor has held the title. However, unlike general warranty deeds, grant deeds don’t give warranties as to any claims that may have happened before the grantor acquired the title and doesn’t promise to pay legal expenses of defending title claims.

If you’re looking to buy real property and need the help of a professional, Lightspeed Escrow can help you get a grant deed and facilitate it. Contact us for any additional information you might need, and we’ll be glad to help.