SPECIAL WARRANTY DEED: Definition & How It Works (Texas & Florida)

special warranty deed
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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 to 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 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 maybe use. 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 offer in the sale of commercial properties. A company is normally aware of any title concerns that when they 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 they 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 use:

  • 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 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 being 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 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 that 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 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.

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 and correctly.

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 5 main types of deeds that you can use: Warranty Deed, Special Warranty Deed, Quitclaim Deed, 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.

  1. GRANT DEED: Best US Practices & All you should Know
  2. Bargain and Sale Deed: How it Works, Importance, Components & Drawbacks
  3. Deed Of Trust: Overview, Mortgage vs. Deed of Trust & How it Works
  4. AMERICAN RESIDENTIAL WARRANTY: Best Easy Guide for Newbies
  5. COST OF HOME INSPECTION: Average Inspection Costs In The United State
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