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Warranty Deed vs Quitclaim Deed

Warranty deeds guarantee that the seller owns clear title which can be transferred (conveyed). In general, warranty deeds convey property with the following covenants or warranties:

    1. Covenant of seisin (possession) - the grantor warrants that they have clear title to the property and the legal right to convey it.
     2. Covenant against encumbrances - the grantor warrants that the property is free of encumbrances apart from those of record or disclosed to the buyer.
     3. Covenant of quiet enjoyment - the grantor guarantees that the title is free of any defects and that grantor will defend the title against claims from any and all persons.
     4. Covenant of further assurance - the grantor promises to deliver any document or instrument necessary to perfect the title (make the title good).

The covenant against encumbrances dictates that all encumbrances, including mortgages, be satisfied and not owing at the time of transfer. Therefore, any pre-existing mortgage must be paid in full at closing. However, the covenant against encumbrances applies to an encumbrance of which the buyer does not grant an exception. The buyer can choose to take an exception regarding the mortgage but there are few opportunities that do not require the lender's approval.

The buyer can take title via a warranty deed with the exception of an encumbrance, such as a mortgage, if the buyer, seller and mortgage company agree. Such is the case with an assumable mortgage. Assumable mortgages allow the home buyer to take over the existing mortgage of the seller as long as the lender of that mortgage approves. This seldom occurs since assumable mortgages are rare and most mortgages have what is referred to as a "due on sale clause" which forbids the sale of the property without paying the mortgage in full. Unless the terms of the present mortgage are considerably more favorable than current market terms, the lender will choose to close the loan at the sale of the property.