Grantor vs Grantee: Learning Real Estate Terms

Real estate students often find the legal jargon used in property transactions challenging, especially during the closing process. One example is grantor vs grantee, which can seem confusing at first.

Misunderstanding these concepts could lead to costly mistakes, both in your real estate licensing exam and in real-life transactions. To help you master these terms and succeed in your exam, we’ll explain the differences between a grantor and a grantee, along with related concepts like deeds and titles.

By the end of this guide, you will fully understand these roles and feel confident applying them in your exam.

What is a Grantor vs Grantee in real estate?

In real estate, a grantee is the person or entity receiving property rights, while the grantor is the one transferring those rights. For example, if a couple buys their first home, they are the grantees, receiving ownership rights from the seller, who is the grantor.

Let’s break down these roles.

What is a Grantor in real estate?

The grantor is the person or organization transferring ownership rights of a property to another person, referred to as the grantee. The grantor is often the current owner of the property and can be an individual, business corporation, or even a bank (in the case of selling repossessed property).

In simple terms, the grantor is the party giving away or selling the property, while the grantee is the party receiving it.

What is a Grantee in real estate?

A grantee is the individual or entity that receives property rights from a grantor. This could be a homebuyer, an investor, or anyone taking ownership of a property.

In simple terms, if you’re buying a home, you are the grantee — the person receiving legal ownership of the property from the grantor.

Examples of Grantor vs Grantee

Let’s break down a real estate transaction to better understand the roles of the grantor vs grantee.

Imagine John, the current owner, is selling his beachfront property to Julia, who is buying the property to live in. In this case:

• John is the Grantor: He is the individual transferring the property rights to Julia. As the seller, John is the one giving up ownership of the property. In this role, he is responsible for signing the deed that officially transfers the ownership rights to Julia, making him the grantor in the transaction.
• Julia is the Grantee: She is the buyer who will receive the property rights from John. As the grantee, she will now legally own the property once the transaction is complete. Julia’s responsibility is to accept the transfer of ownership and, after the deed is recorded, she becomes the new legal owner of the beachfront property.

In any real estate deal, legal agreements transfer property and bind both parties to the terms of the transaction. The grantor gives up ownership, and the grantee gains it. These roles are essential in every property transaction, whether it’s a sale, gift, or inheritance.

Grantee vs Grantor Deeds

Understanding the grantor-grantee relationship involves knowing how deeds and titles work.

A real estate deed is the physical legal document used to transfer ownership from the grantor to the grantee. It includes details like the names of both parties, a property description, and conditions of the transfer. The deed is signed by the grantor and may need to be legally recorded, depending on the state.

The real estate title isn’t a physical document. It represents the legal ownership rights over a property. The deed transfers those rights, while the title refers to the ownership status.

In short, the deed transfers ownership, and the property’s title represents the legal ownership.

How the Transfer of Deed or Title Works

The transfer of ownership is governed by state law. Before closing, a title search is typically conducted to ensure there are no outstanding claims on the property.

A title search checks historical records to confirm the legal ownership of the property. It looks at documents like deeds, court records, and property indexes.

For example, if you’re buying a house, a title search might show that the seller is the legal owner and there are no unpaid taxes or mortgages. For commercial property, a search might reveal a lien from an unpaid contractor.A title abstract summarizes the property’s legal history and highlights any ownership changes or liens on the property. If issues are found, title insurance may protect the grantee from future claims.

Types of Deeds for Grantor vs Grantee

Real estate transactions use different types of deeds. Here are some common ones:

General Warranty Deed

A general warranty deed guarantees that the title is free of liens and encumbrances, offering the highest level of protection to the grantee. The grantor guarantees the property is free of claims and will defend the buyer in court if any claims arise.

This type of deed is common in standard sales.

Special Warranty Deed

A special warranty deed (also called a limited warranty deed or grant deed) guarantees two things:

· The grantor has the legal right to transfer the property and hasn’t sold it to anyone else.

· No title problems arose during the grantor’s ownership.

Let’s say Mary bought a house to Jake with a special warranty deed. Years later a niece of a previous owner (not Jake) appears saying that she has claim to the house. In that case Mary will not be protected by the special warranty deed because it only ensures there aren’t any defects on title during Jake ownership, not prior to him. Jake as a seller will be protected from liability, but Mary won’t.

This type of deed offers less protection to the grantee compared to a general warranty deed.

Quitclaim Deed

A quitclaim deed transfers ownership without any guarantees from the grantor about the property’s condition or title status. It’s risky for buyers but often used between family members or in divorces. That’s because there is an existing relationship of mutual trust and the warranties are less needed.

Deed in Lieu of Foreclosure

A deed in lieu of foreclosure is used when a financially distressed homeowner voluntarily transfers ownership to the lender to avoid foreclosure. It’s a way to satisfy the mortgage debt and avoid the lengthy foreclosure process, which can even include going to court.

What Is the Best Deed for a Grantee?

The best deed for a grantee depends on the circumstances. For a standard home buyer, a general warranty deed is usually the best option because it offers the most protection from any claims or encumbrances that may appear after the closing.

Who Pays for Title Insurance – the Grantor or the Grantee?

Title insurance protects the buyer (grantee) from future claims against the property. If the buyer is financing the purchase, they usually pay for it and other legal costs. In some cases, the seller (grantor) may pay. It all depends on the agreement.

Misunderstandings Related to Grantee and Grantor Roles

Real estate transactions are complex, and common mistakes include:

Assuming Clear Title: Never assume the grantor has a clear title without a proper title search. There may be undisclosed liens or claims against the property that can complicate the transfer.

Overlooking Legal Capacity: The grantor must have the legal capacity to transfer ownership.That means they must be of sound mind and not under any legal constraint that would prevent them from selling the property. Otherwise, the transaction may not be valid.

Misunderstanding Rights: Grantees sometimes misunderstand the extent of the rights transferred. The property may have certain restrictions or easements that limit its usage.

Skipping Legal Advice: Always consult a real estate attorney for complex transactions. A real estate attorney can help identify and resolve issues related to the title, compliance with local laws, and drafting or reviewing contracts to protect the interests of all parties involved.

Key Points to Remember About Grantor vs Grantee

To remember the difference:

· Grantor: The person transferring the property.

· Grantee: The person receiving the property.

A simple rule: “-or” means the giver, while “-ee” means the receiver.

Other Common Real Estate Terms with -or and -ee rule

Here are some other examples of real estate terms that use these suffixes:

Lessor vs. Lessee: The lessor is the landlord renting out the property, and the lessee is the tenant renting it.

Mortgagor vs. Mortgagee: The mortgagor is the borrower who gives the mortgage, while the mortgagee is the lender who receives the mortgage as collateral.

Trustor vs Trustee: A trustor establishes a trust, which allows a third party, the trustee, to manage assets for beneficiaries. The trustee holds and manages these assets on behalf of the beneficiaries.

Summing-Up 

Understanding the difference between grantor vs grantee is crucial for real estate students. These terms are the foundation of property transactions and are essential for both exams and real estate careers. From understanding deeds to avoiding common pitfalls, mastering these terms will help you avoid legal issues and succeed in real estate.

Keep learning, and always seek legal advice for complex transactions. The more you know, the better prepared you’ll be for both your real estate exam and career.