Deeds – Special Warranty Deed
Frequently Asked Questions About Special Warranty Deeds
- What is a special warranty deed, and how does it differ from a general warranty deed? A special warranty deed is a real estate deed where the seller (grantor) only guarantees against title defects or encumbrances that arose during their ownership of the property. This is in contrast to a general warranty deed, which guarantees the title is free and clear of defects for the entire history of the property, regardless of prior ownership. The key difference lies in the timeframe of protection offered to the buyer; special warranty deeds provide limited protection tied to the grantor’s period of ownership, whereas general warranty deeds offer much broader protection.
- What specific assurances does a grantor provide under a special warranty deed? A grantor using a special warranty deed provides two primary guarantees: they own the property and have the legal right to sell it, and that no encumbrances (liens, debts, claims) were created on the property during their ownership. Importantly, they do not guarantee against pre-existing title issues from previous owners.
- In what types of real estate transactions are special warranty deeds most commonly used? Special warranty deeds are most commonly used in commercial property transactions. They are also often used when properties are sold through foreclosures, as REO (Real Estate Owned) sales by banks or government entities like Fannie Mae (FNMA) and HUD. The seller in these cases typically doesn’t want to be responsible for any issues with the title arising from prior ownership. Single-family and other residential property transactions generally use a general warranty deed.
- What are some alternative names for a special warranty deed? Special warranty deeds can be referred to by several other names, including covenant deed, grant deed, and limited warranty deed. These terms may vary depending on the specific state or jurisdiction.
- Why might a buyer choose to accept a special warranty deed over a general warranty deed? While a general warranty deed provides more comprehensive protection, a buyer may accept a special warranty deed under circumstances such as purchasing foreclosed or bank-owned properties. In these instances, the seller is often unwilling to assume responsibility for prior title issues, and the special warranty deed reflects this limitation. In these instances buyers generally rely on title insurance.
- How does title insurance relate to special warranty deeds? Title insurance is a policy that protects the buyer against financial loss due to title defects, liens, or other encumbrances. While a title search is typically done, some issues may be missed. Whether a buyer has a general or a special warranty deed, purchasing title insurance is recommended to mitigate the risks of pre-existing or undiscovered title problems. Title insurance is important in conjunction with a special warranty deed due to the limited scope of the grantor’s guarantees.
- If I buy a property with a special warranty deed, what risks do I need to be aware of? The main risk with a special warranty deed is that you could be held responsible for title defects or encumbrances that occurred before the grantor owned the property. For example, if a previous owner had unpaid debts that resulted in liens against the property, those liens could affect your title even after you bought the property. The grantor is not liable for such pre-existing issues with the title.
- What are the key components included in both general and special warranty deeds? Both general and special warranty deeds include key components: the name of the seller (grantor), the name of the buyer (grantee), the physical location of the property, the seller’s warrant that they own the property and have the right to transfer it, the assurance that the property is free of encumbrances beyond those noted, and a guarantee that the title is valid. The crucial distinction between the two lies in the timeframe these guarantees cover.
