Making a real-estate-secured loan is a high-risk endeavor. That is why lenders want to put every possible measure in place to reduce the risk of any unforeseen legal concerns that could affect their ownership rights if they have to take possession of the property. A warranty deed, a significant contractual agreement that protects your property against rival claims down the road, is an important part of this process.
A warranty deed is a binding contract from the property seller to the buyer ascertaining that the seller is the property owner free of any issues that could affect the buyer’s satisfaction of the ownership in the future. It serves as a formal guarantee given by the previous owner that no one else would assert any legal claim to the property.
There are three types of warranty deeds:
- General Warranty Deed
This deed offers the most protection to the lender looking to spend a huge amount of money on a property. When the general warranty deed is breached, the selling party is held liable.
- Special Warranty Deed
This form of deed works in the same way as a general warranty deed. The sole exception is that it is only valid for a limited time. It is majorly used in transactions involving commercial real estate
- Grant Deed
Grant deeds can be used in place of warranty deeds. It provides essentially the same protection for a lender as a general warranty deed, with the exception that it does not suffice for third-party claims.
To learn more about warranty deeds as a private lender and how it can protect your interests when giving out real estate-backed loans, click this link to read more:
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