Mortgage Loan Originator (MLO) Licensing Practice Test

A warranty deed is a legal document that guarantees to the grantee (the buyer) that the title to the property is valid and free of defects. By using a warranty deed, the seller (grantor) asserts that they hold clear title to the property and have the right to sell it. Additionally, the warranty deed often provides assurances that there are no undisclosed claims or liens against the property. This means that if any issues do arise concerning the title—such as another party claiming ownership—the grantor is legally responsible for resolving the issue, thus providing a high level of protection for the buyer.

The other answer choices do not accurately reflect the primary function of a warranty deed. While a warranty deed does imply that the property is free of liens, the more comprehensive guarantee is about the validity of the title as a whole. It is not intended for leasing purposes, which makes the lease reference irrelevant. Lastly, warranty deeds are not limited to commercial transactions; they are commonly used in residential real estate dealings as well. Therefore, the correct answer captures the essence of what a warranty deed offers in terms of title assurance.