Warranty of title
When buying a home, you may encounter mortgage and real estate terms that are unfamiliar. Warranty of title is a valuable term that’s helpful to understand because it’s related to protecting your new home’s ownership rights.
What’s warranty of title?
First, let’s review the differences between a warranty deed and a warranty of title. Also known as a property deed, a warranty deed to a home is a written document that serves as a record of real estate ownership. Warranty deeds are used to legally transfer the title of a property. Title refers to the actual legal ownership rights of your home and is not a physical document.
Warranties of title are included in warranty deeds. A warranty of title is a guarantee from the seller that they can legally sell the home and that there are no liens on it. A lien on a home gives someone a legal claim to a portion of a property for money owed. Typical liens include tax liens for unpaid taxes, mechanical liens for failing to pay contractors and mortgage liens. When a home has no liens or loans on it, it’s considered to have a clear title.
During the mortgage closing process, a title company will research any title claims to check ownership and make sure the title is valid. The title company is commonly involved in closing, acting as the escrow agent . If you are buying a home, it is typically up to you to hire the title company.
Breach of warranty of title
If you buy a home using a warranty deed and the seller fails to pay off liens against the property, they are in breach of warranty. As the homebuyer, you are entitled to compensation if there is a breach of the warranty. As Forbes Advisor explains, “If there is a breach of the general warranty deed, the seller is responsible—even if it happened without them knowing or at a time when they didn’t own the property.”
Explore Guild’s top ten real estate terms to explore the vocabulary words helpful to know when you’re buying your first home.
The above information is for educational purposes only. All information, loan programs and interest rates are subject to change without notice. All loans subject to underwriter approval. Terms and conditions apply. Always consult an accountant or tax advisor for full eligibility requirements on tax deduction.