What Is the Difference Between Warranty Deed and Trustee Deed?

By Cindy DeRuyter, J.D.

What Is the Difference Between Warranty Deed and Trustee Deed?

By Cindy DeRuyter, J.D.

The main difference between a warranty deed and a trustee deed lies in who it protects. Like all deeds, these two legal documents are both used to transfer titles from one owner to another. A warranty deed protects property owners from future claims that someone else actually owns a portion (or all) of their property, while trustee deeds protect lenders when borrowers default on their mortgage loans.

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Warranty Deeds and Protection for Property Owners

When sellers transfer title with a warranty deed, there are two parties to the transaction: the seller or grantor, who signs the warranty deed transferring ownership, and the buyer or grantee, who assumes ownership rights at closing.

If you assumed ownership of your property with a warranty deed, that means the previous owners warranted that they owned the property you bought and that they had the full rights to transfer ownership to you free of liens or other encumbrances. A warranty deed provides peace of mind, letting the new owner take title without having to worry that someone could later assert a claim that arose before they closed on the property.

Trustee Deeds and Protection for Lenders

Trustee deeds protect lenders' rights. With this legal document, property, for example, is owned in trust, with a title company, bank, escrow company, or finance company typically serving as the trustee, or agent. The real estate property in question is held as collateral for the outstanding mortgage loan. When you pay your mortgage in full, the agent transfers the title to you as the property owner and may use a warranty deed to make that transfer.

A trustee deed with an underlying promissory note is similar in many respects to a mortgage, protecting lenders when borrowers default on their mortgage loans. If, however, the property enters foreclosure because you are behind on the mortgage, this legal document can make it easier and faster for the lender to finalize the foreclosure process outside of court. The agent can sell the property relatively quickly without having to file a lawsuit against you.

Other Uses for Trustee Deeds

Trustee deeds are commonly used in many states in lieu of mortgage deeds. The term itselfsimply refers to the capacity of the individual executing the deed, so these deeds are not unique to situations where a borrower has an outstanding loan on real estate.

If you create a revocable or irrevocable trust and transfer ownership of your real estate into the trust, your trust owns the property. The named trustee is the person or company who has authority to sell, transfer, or encumber the property, subject to the terms of the underlying trust agreement. When this named agent transfers real estate out of a trust, they may execute the particular deed to transfer ownership to a trust beneficiary or to a purchaser, on behalf of the trust.

If you buy, sell, or transfer real estate, you may wish to consult with a licensed real estate attorney in your state. A lawyer can advise you on the benefits and drawbacks of different types of property deeds, based on your specific situation. If you are confident in your understanding of the effects of various property deeds, you might also consider using a reputable online legal services provider to prepare your property deed.

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.