Buying a home is one of life’s most significant milestones, and it’s a source of great joy for many people. But at the same time, the process involves a lot of paperwork.
Most of this paperwork is routine if you’re a real estate lawyer. That said, the legal language involved can be confusing for the average homeowner. But unfamiliar words and legal terms don’t have to be complicated. In fact, they can usually be explained in very simple terms.
With that in mind, let’s analyze the terms grantor vs. grantee, which you’ll encounter in almost any real estate transaction.
What Is A Grantor?
A grantor is the person who owns a given asset. In real estate, the grantor is the current property owner. Typically, this type of language is used when transferring ownership or selling a home. In these situations, the grantor is the one selling or giving the property to another party.
Grantors can be property owners, banks, county sheriffs, etc. Essentially, anyone who owns the asset will qualify as the grantor — and be referred to as such in legal documents (such as a deed) transferring said ownership.
What Is A Grantee?
In general law, the grantee is the person who receives an asset, including cash, scholarships, or real estate. When a real estate transaction occurs, the grantee receives the title from the grantor. Similarly, a scholarship recipient is considered the grantee of the scholarship.
When a deed or title is written, the names of the grantor and grantee will be clearly specified. This guarantees that the property is legally transferred from one party to the other. The same is true for grantors and grantees in other types of contracts.
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Examples Of A Grantor Vs. Grantee
There are two common examples of a grantor vs. grantee relationship in real estate: property rentals and mortgage loans. When renting a property the landlord, called the lessor, rents the unit to a tenant, the lessee, in exchange for rent. The lessee has the temporary right to live in the property based on the terms in the rental agreement.
When applying for a mortgage, the bank acts as the mortgagor while the homebuyer is the mortgagee. The bank originates the loan, and the buyer pays the balance with interest. These are both examples of grantor vs. grantee relationships, with landlords and banks acting as grantors, respectively. The tenant and homebuyer are the grantees in the scenarios.
What Is A Grantor Vs. A Grantee In Real Estate?
The grantor and the grantee are typically individuals who are transacting an exchange. However, the grantor or grantee can also be a company or organization. For example, a city might seize a property for unpaid taxes, or a developer might sell hundreds of homes to individual customers.
In fact, a grantor/grantee relationship doesn’t have to be an outright sale. It can also be a conditional or temporary relationship. A good example of the former is a lessor/lessee relationship. In this arrangement, the lessor (landlord) grants temporary occupancy in exchange for monthly rent payments. The lessee (tenant) agrees to pay on time in exchange for their occupancy.
A good example of a conditional relationship is a mortgage. In this case, the lender (grantor) holds a lien on the title until the homeowner (grantee) has paid off their mortgage. The homeowner agrees to make payments in exchange for the removal of the lien when payment is complete.
Transferring A Deed Or Title
The exact legal language used to transfer property ownership varies from state to state. For example, most states refer to the official ownership paper as a deed, but some states call it a title instead. Regardless, they’re basically the same thing.
The buyer’s attorney or real estate agent will typically perform a title search as part of the closing process. This is a public record search to establish that the title is “clean.” This means that there’s a clear record of ownership, from the beginning of public records up to the current owner. Buyers should also purchase title insurance, in case the title search misses any adverse information.
What Types Of Deeds Name Grantors & Grantees?
There are several types of deeds that name grantors and grantees. These include:
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General Warranty Deed
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Grant Deed
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Quitclaim Deed
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Special Warranty Deed
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Deed In Lieu Of Foreclosure
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Special Purpose Deed
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Interspousal Transfer Deed
These deeds transfer permanent legal ownership of a property, but not all of them work the same way. Let’s look a little closer at each!
General Warranty Deed
A general warranty deed offers the most protection for the grantee. In this kind of deed, the grantor doesn’t just promise that they hold a clean title; they also agree to pay legal fees if a third party claims the title.
Grant Deed
A grant deed is the most common type of real estate sale. With a grant deed, the grantor guarantees that they have disclosed any liens or restrictions that they are aware of. They also guarantee that they haven’t sold the property to any third party.
A grant deed does not protect the buyer from claims made before the grantor owned the property. This type of deed only protects from any current or outstanding issues with the property ownership, thus offering some protection to the grantor against issues they may be unaware of.
Quitclaim Deed
With a quitclaim deed, the grantor makes no guarantees of any kind. They simply sign over whatever ownership rights they possess – and there’s a chance they may not have any rights whatsoever. With this arrangement, there are virtually no protections for the grantee.
Quitclaim deeds are almost never used in typical real estate transactions. They are much more common when transferring property ownership within a family. Additionally, quitclaim deeds can be useful in estate planning when transferring property into a trust.
Special Warranty Deed
A special warranty deed is similar to a grant deed, but with an additional layer of protection. The deed states that the grantor has not sold the property to anyone else and that there are no liens or encumbrances, other than issues the buyer is already aware of.
The added layer is that a special warranty deed also defends the title from claims of all persons or entities, including previous owners. In some states, grant and special warranty deeds may be used interchangeably but this additional protection is important to distinguish the two.
Deed In Lieu Of Foreclosure
A deed in lieu of foreclosure, as the name implies, is only used by homeowners hoping to avoid a foreclosure. These deeds are used as a last resort and will ultimately protect homeowners from the costly foreclosure process.
In these scenarios, homeowners are often behind on their payments, and the bank has threatened to foreclose. Instead the homeowner voluntarily transfers ownership and the foreclosure is not added to their credit report.
Special Purpose Deed
A special purpose deed is a deed used by public officials, or others acting in an official function. These can include sheriffs holding property auctions, or individuals who are the executor of a will. In this case, the grantee cannot hold the official personally responsible if they later have to defend their title in court. They may, however, be able to sue a larger entity. For example, if you bought the house at a sheriff’s auction, you might be able to sue the county or the sheriff’s office.
Interspousal Transfer Deed
An interspousal transfer deed is a free, tax-free transfer of property from one spouse to another. The property is considered to be owned by the second spouse (the grantee). It is not community property. Generally, people use an interspousal transfer deed when one spouse has better credit. By transferring ownership to that spouse, they can refinance at a better rate.
Grantee Books & Title Searches
Grantee books are an old-school way of recording title transfers. These books are filled with lists of grantees, listed by last name. This makes it easy to document the chain of ownership. Depending on your jurisdiction, there may be paper records dating back well over a century. Newer records, however, are normally digitized, and many jurisdictions are in the process of digitizing older records.
Regardless of whether the format is paper or digital, a title search works more or less the same way. You work backwards in the grantee book from each owner to the previous one, and you then continue the process until you reach your jurisdiction’s earliest record. As long as there’s an unbroken chain of ownership, the title is considered clean.
Grantor & Grantee Title Insurance & Warranty Deeds
If you are the grantee of a deed, even a general warranty deed, you should purchase title insurance. In fact, your lender will require you to purchase it, so it’s not even optional unless you’re buying your house outright.
In many real estate transactions, the grantor will pay title insurance costs on behalf of the grantee. This is mutually beneficial, for two reasons. For one thing, insurance is typically cheap, so it’s not a major expense. For another thing, insurance will also protect the grantor from any liability in the event of a claim, as long as the grantor has conducted the sale in good faith.
Summary
Comparing and contrasting the terms grantor vs. grantee might seem complicated, but as you can see, it’s really not. In a real estate transaction, the grantor is the seller, landlord, lender, or a person signing over the title in an official capacity. The grantee is the new homeowner or tenant. That’s all there is to it!
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