A signed deed is required to transfer ownership of a property when purchasing a home. General warranty deeds, quitclaim deeds for property transfer between friends and relatives, and bargain and sale deeds are among the several types of deeds used in real estate. We’ll talk about the special warranty deed in this piece. We’ll go over what they are, what they cover, and when you might need to utilize one.
What Is A Special Warranty Deed?
A special warranty deed for real estate protects the buyer by ensuring that the title has been free and clear of encumbrances throughout the seller’s ownership of the property. Beyond their ownership, it does not ensure a clear title.
The buyer (aka grantee) is protected by this deed since the seller (grantor) guarantees that the property is free of defects that emerged during the seller’s ownership. The seller, on the other hand, is not responsible for any liens or claims against the property that existed prior to their purchase. Any warranties are only valid for the time they were in their possession.
A special warranty deed is a real estate deed in which the grantor the seller of the property warrants solely against events that occurred during their actual ownership. In other words, the grantor does not guarantee that the property is free of any defects in clear title that existed before they took possession of it.
Overview
The most typical usage of special warranty deeds is in commercial real estate transactions. A general warranty deed is commonly used in single-family and other residential property sales. The general warranty deed is required by many mortgage lenders.
Covenant deeds, grant deeds, and limited warranty deeds are all terms used in different states to describe special warranty deeds. Only the time when the seller held title to the property with a specific warranty deed is covered by the guarantee. Special warranty deeds do not cover errors in a free-and-clear title that may have existed before the seller took possession.
As a result, the grantor of a special warranty deed is solely responsible for debts, issues, or other encumbrances on the title that they caused or that occurred while they owned the property. Any difficulties arising from the prior owners are the grantee’s responsibility.
Example of Special Warranty Deed
Although general warranty deeds are more prevalent in residential real estate transactions, there is one circumstance in which a special warranty deed is required. This is the only arena where foreclosed, REO, or short-sold properties can be found.
This type of deed is to sell most Federal National Mortgage Association (FNMA), Housing and Urban Development (HUD), and bank-owned homes. One of the most common reasons for using special warranty deeds is that the selling authority does not want to be liable for anything that happens to the property before the seizure.
A couple with a home in Grenada County, Mississippi, for example, defaulted on their loan payments in 2012. Their lender, Wells Fargo Bank, foreclosed on the property in February 2013. Wells Fargo “conveyed the Property to FNMA in a special warranty deed,” according to subsequent legal documents.
When Are Special Warranty Deeds Used?
There are three main types of transactions in which special warranty deeds may be used. We’ll go over them and give explanations of examples when they apply.
#1. Estate transactions
A special warranty deed may be issued in an estate sale where the person responsible for administering the estate has nothing attesting to the history of the property previous to the owner’s death. If John Doe died and the executor only knew that he had no outstanding commitments that would generate a lien on his property personally, the special warranty would cover the fact that the seller had no title issues, but not all that had happened with the property previously.
#2. Commercial property transactions
A specific warranty deed is frequently offered in the sale of commercial properties. A company is normally aware of any title concerns when they purchase the building, but this awareness does not always extend to past owners. Commercial transactions are those that take place between businesses. A commercial transaction occurs when Apple sells a building to Microsoft.
#3. Foreclosure
If a property is foreclosed on for any reason, the authorities or investors selling it will usually simply guarantee that no new claims or liens have been filed against it since it gained ownership. When buying a foreclosure, you need to exercise extra caution because you may be to do things like pay back taxes in order to clear the property of existing liens. This is especially true when buying a foreclosure because folks who can’t afford to make their mortgage payment frequently have additional financial problems, so be cautious.
Special warrant deed in Texas
The Texas special warranty deed form provides a limited warranty of title. With a special warranty deed, the person transferring the property guarantees that he or she has done nothing that would cause title problems. But makes no guarantees about what might have happened before he or she acquired the property. In Texas, special warranty deeds are often used:
- To transfer property to a trust like a living trust—that the transferor controls or benefits from;
- To transfer property to a business like a limited liability company that the transferor owns;
- For sales of commercial or multi-family residential property;
- To transfer property to a new owner that is purchasing title insurance on the property and is not concerned with the limited warranty of title; or
- In other circumstances where the current owner does not want to be legally responsible for problems with the title that arose before the current owner owned the property.
A special warranty deed requires special language to ensure that the deed qualifies as a special warranty deed. This language is automatically by our deed preparation service and is valid in all Texas counties.
Special Warranty Deed Florida
A deed that transfers ownership of real estate from a grantor to a grantee. A special warranty deed in Florida transfers title in fee simple to the grantee with warranties. Also, covenants of title are to the grantor’s acts or that result from the grantor’s conduct. A special warranty deed is a type of deed that is common in the sale of commercial real estate. Drafting comments containing relevant explanations and drafting recommendations have been to this Standard Document. Emergency procedures imposed in response to the 2019 new coronavirus epidemic are now affecting real estate and construction transactions (COVID-19).
General Warranty Deed
A warranty deed is a document that transfers ownership or title to commercial or residential real estate and includes the seller’s assurances. The property title is free and clear of ownership claims, outstanding liens, or mortgages. or other encumbrances by individuals or entities other than the seller, according to these guarantees.
A general warranty deed covers the property’s full history and ensures that it is free and clear of faults or encumbrances. Regardless of when they occurred or who owned it at the time. The general warranty deed ensures that the buyer will receive full ownership rights without any valid possible legal difficulties.
Special Warranty Deeds Vs. General Warranty Deed
General warranty deeds and special warranty deeds are two of the most common deeds in traditional real estate transactions when the buyer and seller are strangers.
The finest thing a seller can do for you as a buyer is to provide you with a general warranty deed. This guarantees that there are no issues with the title, whether they arose during or before the seller’s ownership. This can provide you complete peace of mind when buying because you’ll know if any claims or liens are against the property. The seller will be legally accountable.
Read Also: IMPOUND ACCOUNT: Understanding the Impound Account and How to avoid it
A special or limited warranty, on the other hand, is different. A special warranty deed simply ensures that there are no title issues from the time the present seller possesses the property. With this form of a deed, it’s feasible that someone else may come along with a claim to the property or a lien from a long-unpaid obligation. You could be forced to leave your home if the property right was valid.
Getting title insurance is one way to fully protect yourself against any liens or claims on the property that may come back to harm you in the future. If you’re purchasing a house with a mortgage. Your lender will need you to purchase a lender’s title insurance policy, which pays out the loan in the event of future title issues. You should carefully consider purchasing an owner’s title policy if you’re buying a home with a special warranty deed.
Which is More Important Title or Deed?
The title or the deed—which one is more significant? Due to the fact that they both serve a function in the process of selling a house, the title and the deed are both of equivalent significance. A title search, for instance, can not only validate the current owner of the property but also disclose any outstanding loans, liens, or property taxes that are owed on it.
How Do I Record a Special Warranty Deed in Texas?
The original deed needs to be filed and recorded with the county clerk in the county where the property is located after it has been signed and notarized by the parties involved in the transaction. You have the option of mailing the deed or bringing it in person to the office of the county clerk. Original documents are the only ones that can be recorded.
Why Would a Deed be Rejected?
In the event that any one of the following objections is presented, the deed in question shall be rejected: There is an error in the names and particulars of the transferors, transferees, mortgagees, applicants, and consenters in any way, shape, or form, regardless of how slight or significant the error may be. (Revised Case Reports No. 2/2009, 10/2014, and 36 of 1954) There are inaccuracies in the presentation of the properties.
Who Signs a Special Warranty Deed in Texas?
The person who is granting the property in Texas is required to sign their name after obtaining either two Witnesses or a Notary Public. It is important to keep in mind that the Texas County Recorder’s Office, which is the location where these documents are filed, will only accept this document if it can be demonstrated that the Texas Grantor’s signature was properly witnessed or notarized. This is the case regardless of whether or not the document was filed in Texas.
Special Warranty Deed and Title Insurance
When a buyer buys a house with a special warranty deed. There’s a chance that a previous creditor or owner would file a claim against it. The best approach to protect yourself as a buyer is to acquire title insurance at the time of purchase. The title insurance provider will investigate the title to ensure that it is clear. And then issue insurance to protect you in the event that an old claim is against it.
A special warranty deed provides some title assurance to the buyer, but it does not provide total protection. However, if appropriate safeguards are in place, these types of acts may be allowed.
Search online for “special warranty deed” and your state’s name to locate the appropriate form. If you need assistance writing a special warranty deed or any other form of a deed. An online services provider can assist you in making sure everything is correct.
Why Would You Use a Special Warranty Deed in Texas?
A limited guarantee of title can be obtained through the use of the Texas special warranty deed form. The person who is transferring the property guarantees, through the use of a special warranty deed, that he or she has not done anything that could lead to problems with the title of the property. However, the person making the transfer does not make any guarantees regarding what may have occurred prior to the person acquiring the property.
What is the Difference Between a Special Warranty Deed and a General Warranty Deed in Texas?
A special warranty deed is more limited than a general warranty deed in that it only warrants that the title is free and clear from other claims during the time period that the grantor was the owner of the property. This is in contrast to a general warranty deed, which provides a wider range of protections. It does not provide any protection against claims that arose before the grantor’s possession of the property.
What are the Limitations of a Deed?
Your ability to use your property in certain ways may be restricted by a deed restriction. The things you can build on your land and the activities you can engage in on that land can be constrained by deed restrictions. These limitations are typically imposed by a homeowners association (HOA), which is one variety of communities that are governed by deed restrictions.
Conclusion
A title search will usually reveal any liens or claims on a property’s title. A title search is a review of public records to determine who owns a piece of real estate. To verify property ownership, attorneys, title companies, and people can do title searches. Despite the fact that these searches are thorough, there is still the potential that something will be overlooked. As a result, most buyers obtain title insurance when purchasing a property. Regardless of the form of warranty deed they employ. An indemnity insurance policy protects a buyer from financial claims made against the title of a property they own.
FAQ
Are special warranty deeds bad?
It will not protect against title issues that arose prior to the time the seller took occupancy. Consequently, it offers less protection to buyers, and more protection to sellers, than a general warranty deed, which is the most common option for selling or buying a property.
What is the best type of deed to get?
When you’re looking at purchasing a piece of land, there are five main types of deeds that you can use: a warranty deed, a special warranty deed, a quitclaim deed, a bargain, and sale deed, and a grant deed. A warranty deed is the best of the best.
Is it hard to sell a house with a quit claim deed?
While quit claim sales are faster and involve less paperwork, they leave the buyer at risk. That means it may be difficult to convince most potential buyers to enter a deal that uses a quitclaim deed.
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