Grantor vs. Grantee: Defined and Differences Explained
LS
Summary:
In the simplest terms, the grantor is the owner of an asset and the grantee is the one buying the asset. In a real estate transaction, the grantor would be the seller of a piece of property and the grantee is the one buying the real estate. For legal reasons, the terms grantor and grantee are used in legal documents, like warranty deeds, in most real estate transactions.
Buying a house is an exciting time, but it’s also an incredibly lengthy process that requires a ton of paperwork to transfer ownership rights. And that paperwork uses a lot of legal language that can be pretty confusing if you don’t familiarize yourself with the terminology.
Today we’re going to look at the differences between grantor and grantee and go over the types of real estate deeds where you’ll see the grantee/grantor language. We’ll also dive into what that means for both the current property owner (the grantor) and the buyer (the grantee).
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Grantor vs. grantee
There are two sides to every transaction — the one who’s buying the asset and the party who’s selling it. As mentioned, in a real estate transaction the grantor would be the one who is selling the property, otherwise known as transferring ownership. The grantee receives the ownership rights and is the buyer of the real estate/property.
In most residential real estate property transactions, the grantor and grantee are two individuals, but that’s not always the case. Either one party or the other party (or both parties involved) might be an entity that’s buying or selling the property.
The grantor or grantee might also be someone who isn’t the actual buyer or seller of the property, but someone who is acting in an official capacity on either the grantor’s or grantee’s behalf.
Related reading: A similar, but temporary, arrangement would be the lessor/lessee relationship. This is when the lessor (the owner of the property) grants a temporary right to the lessee, who is the person or business that rents the property from the lessor.
How to transfer ownership
As part of the real estate buying process, especially when you’re financing the deal, a title search is conducted to make sure the property is free and clear to sell. In addition, a mortgage lender typically requires the grantee to purchase title insurance. This is part of the closing process and provides protection if any problems arise, as Nathan Claire of Buying Jax Homes points out.
This insurance will protect the buyer against any unknown liens, encumbrances, or other issues that may arise with the property’s title.”
You’ll also be issued some form of warranty deed, depending on the particulars of the transaction, with varying levels of title protection for the grantee. In most cases, a grantee will want a high level of protection if they don’t have a trusted existing relationship with the grantor. The following are some of the common types of real estate deeds between grantors and grantees.
General warranty deed
This type of property deed is probably the most common legal document in a real estate transaction. Its primary purpose is to protect the grantee (the buyer), in the event that the grantor does not hold a free and clear title. It must be signed and witnessed or notarized — depending on the state — to be legally binding.
By signing the general warranty deed, the grantor makes legally binding guarantees that they are the owner of the property and legally allowed to sell it. Furthermore, the grantor promises that title searches won’t reveal any outstanding liens or other encumbrances on the property and that they will pay the legal costs if something does come up.
This type of deed also protects the grantee from any encumbrances that might have occurred prior to the grantor’s ownership. This gives an extra level of protection that other deeds do not. That means even if there were encumbrances on the title before the current owner bought it, they’re still legally responsible for the problem whether they were aware of it or not.
Special warranty deed
A special warranty deed, also known in some states as a grant deed or a limited warranty deed, is similar to a general warranty. However, it doesn’t provide as much protection to the grantee.
The special warranty deed ensures that the grantor has paid off the mortgage (or will), that the title is clear, and that the grantor is legally eligible to transfer the ownership rights. That said, it doesn’t provide any protections in the event that there was an encumbrance on the title from previous owners. This is a good reminder that grantees should secure insurance from a title company as well.
Pro Tip
To get the best deal on title insurance, be sure to shop around for the best deals, try to negotiate the add-on fees, or ask the grantor to pay for the insurance. You might also consult with an unbiased attorney for insurance company recommendations.
Quitclaim deed
A quitclaim deed is a bit different than other real estate deeds in that it doesn’t offer the protections you get from other types of deeds. It does transfer ownership from the grantor to the grantee, but it doesn’t guarantee that the grantor holds the property title or that it’s clear.
In most cases, quitclaim deeds are used when the parties have an existing relationship with one another. For example, you might use a quitclaim deed when transferring property between family members, such as with an inheritance, or if you’re transferring it to a trust. Because of the lack of protections, both the grantor and the grantee should make sure they’re comfortable with quitclaim deeds.
Pro Tip
If you inherit a house with a mortgage through a quitclaim deed, you’ll have to figure out how to afford those monthly payments. Fortunately, you may be able to refinance your mortgage to reduce your monthly payments and interest rate using one of the lenders below.
Deed in lieu
A foreclosure isn’t something anyone wants on their credit report because it can severely limit a person’s ability to obtain a new mortgage in the future. For this reason, among others, people will sometimes seek a “deed in lieu of foreclosure.” This is a situation where the grantee agrees to voluntarily hand over ownership of the home to the mortgage lender in order to avoid the foreclosure process.
It should be noted that the financial institution that holds the mortgage is not required to accept a deed in lieu of foreclosure. For example, if there are liens against the property or it’s in very poor condition, the lender may not agree. However, this agreement can also be beneficial to the lender because it can save them time and money they no longer have to spend on the foreclosure process.
Related reading: If your financial institution won’t accept a deed in lieu, you may instead want to consider a short sale to avoid foreclosure. To get a better understanding of what this entails, take a look at our guide on short sales.
Special purpose deed
A special purpose deed is used when the person signing the papers isn’t the grantor but is acting in an official capacity on behalf of someone else. For example, it’s often used by an executor of an estate in the event of a death or when someone grants power of attorney to another person signing.
Bargain and sale deed
It’s not common to see a bargain and sale deed simply because there aren’t many protections for the grantee.
This type of deed is used in situations where the seller is transferring the property without any warranties or representations as to the condition of title.”
Interspousal deed
An interspousal deed, also known as an interspousal transfer grant deed, transfers ownership from one party in a marriage to the other party. This is most commonly seen in divorce cases where community property is transferred to one spouse.
However, this type of deed isn’t necessarily for divorces. There might be financial hardships or tax reasons for transferring property rights that have nothing to do with divorce. It can also be used to add a spouse’s name to a piece of real estate.
FAQ
Why do I need title insurance and a deed?
Having a warranty deed is not a substitute for title insurance, although it can sound like that on the surface. Because the deed is meant to hold the grantor liable for any title-related problems, you’re pretty much out of luck if the seller can’t be located, goes bankrupt, or dies.
That’s when title insurance can protect you and your property rights. In any case, most mortgage lenders require both to protect their investments.
Key Takeaways
- A grantor, also known as the seller, is the person or entity that conveys ownership of an asset to a buyer.
- In a residential real estate transaction, the grantor is the owner of the house who transfers ownership to someone else.
- The grantee is the person or entity that buys the property from the grantor.
- Property deeds, such as general or special warranty deeds, are official documents used by grantors and grantees in the process of transferring ownership of the property title.
- Most deeds are primarily meant to protect the grantee from liens or claims against the title.
- A general warranty deed provides the most protection for the grantee and is usually a requirement by lenders.
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