If you own a home in Texas, you most likely have a deed of trust with a banking institution that you pay each month. Once you pay off your loan, you will receive a document known as a deed. The deed is your physical proof that you own the property.
However, the type of deed you have is important. Some deeds are better than others. Let’s look at what a warranty deed is and how this type of warranty stacks up against Texas’s other types of deeds.
What is a Warranty Deed?
A warranty deed, also called a general warranty deed, covers the buyer from any liability that may arise from the seller’s lack of ownership. As a seller, you may think that you understand who owns your property, but there could be old liens or encumbrances that you do not know about. If you use a general warranty deed and the buyer has to pay off a lien on the home from 1922, they can sue you for damages even if you didn’t live there when the lien happened.
When a seller has a lien on a property and sells to a buyer with a general warranty deed, the buyer is covered by Texas state law. If a lienholder, previous owner, different title chain, or easement has a claim on the property, the buyer can sue the seller for damages. By Texas law, the seller has to pay.
Seller is Responsible
The problem with buying without a title company is that a seller is responsible for any encumbrances on the property, whether it is their fault or not. There could be a lien from 1956, but the seller is still responsible for reimbursing or paying damages to the buyer because of a general warranty deed’s breadth. These types of deeds make the seller liable for any and all title issues all the way back to when Texas first became a state!
If you are selling a home in Texas, understand that it is never a good idea to sign your house over with a general warranty deed blindly. It is irresponsible to think that you know everything that has ever happened on your land and claim that kind of responsibility if something goes wrong with your title.
As a buyer, a general warranty deed is desirable. It is a guarantee against liability for someone else’s interest in the property. The general warranty deed legally guarantees that:
- The property has not been sold to someone else.
- The seller owns the property and can legally sell it.
- If there are multiple property owners, then the exact claim or portion of the seller’s interest is stipulated clearly and given to the buyer after the transaction.
- Any claim by an unknown party for rights to ownership and title of the property will be dealt with and (in case of loss) reimbursed by the seller.
- The seller and not the buyer cover any debt or other outstanding or unspecified encumbrances.
- The property matches the legal description and address of the property in the deed (1)
As a buyer, you can insist on a general warranty deed and should expect to get one so that you can know that you own your property free and clear.
Safely Give a General Warranty Deed as a Seller
Title companies exist to give sellers peace of mind when using a general warranty deed. “The title company verifies that the title for the property is free and clear of encumbrances. They do the due diligence to be sure that the seller can legally sell the property.
The title company researches the title to make sure that it is free and clear to offer title insurance. If there is ever a claim on the property and someone has to pay damages, the title company is now responsible rather than the buyer or seller.
Special Warranty Deeds
A special warranty deed is different because the seller is no longer responsible for every lien or encumbrance, or issue that may have happened before they owned the property. The seller is only responsible for what happened while they personally owned the property.
In this type of deed, the buyer holds the responsibility for what may have happened before the seller owned the property. So if the seller bought the property in 1988 but there was a lien on the property from 1956 that needed to be paid, the buyer would owe the lien. If a title company were involved and covered the property with title insurance, they would legally have to pay the lien.
If you have questions or concerns about your deed or are thinking of buying or selling property, consult us at Jarrett Law to make sure you make the best decisions. We specialize in real estate law and know all the ins and outs in Texas. Contact us online or by phone today to find out more about how we can help with your property issues.
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