A special warranty deed is a type of real estate deed where the seller, known as the grantor, guarantees that there are no defects in the title of the property only during their period of ownership. Unlike general warranty deeds, special warranty deeds do not cover the entire history of the property title.
Key Takeaways
- Limited Warranty: A special warranty deed only covers issues or encumbrances that arose during the grantor’s ownership period. Issues preceding this timeframe are not covered.
- Two Guarantees: The grantor guarantees that they own the property and have the right to sell it, and that the property has not incurred any encumbrances during their ownership.
- Comparison: Unlike general warranty deeds that cover the entire property’s history, special warranty deeds are more limited but still provide necessary protections for the buyer.
- Usage: Typically used in commercial property transactions, special warranty deeds are less common in residential real estate, where general warranty deeds are preferred.
How a Special Warranty Deed Works
Special warranty deeds are often utilized in commercial property transactions. In residential real estate, most transactions use a general warranty deed due to wider protections. Some mortgage lenders may insist on using general warranty deeds.
Special warranty deeds can also be known by other names, such as covenant deed, grant deed, and limited warranty deed. The key feature of these deeds is that the grantor’s guarantee covers only their ownership period, making the grantor liable only for debts or problems they caused.
General Warranty Deed
General warranty deeds transfer property ownership or title with extensive guarantees from the seller. These deeds ensure the property title is free from past defects, claims, liens, or encumbrances, whether they occurred during the seller’s or any previous owner’s tenure. Widely used in residential transactions, general warranty deeds offer the broadest protection to buyers.
Special Warranty Deed vs. General Warranty Deed
Special warranty deeds, also known as limited warranty deeds, differ because they offer less comprehensive protection compared to general warranty deeds. Here’s a scenario to illustrate:
Imagine you buy a home using a special warranty deed. Later, you discover fines attached to the property from the first owner who was a hoarder and fell behind on mortgage payments. These fines, existing before your grantor’s ownership, may now pose issues for you.
For foreclosures or short sales, special warranty deeds are often used as they place limited liability on the selling authority, like banks or government entities.
Similarities Between General and Special Warranty Deeds
Both deed types generally include:
- The name of the seller (grantor)
- The name of the buyer (grantee)
- The property’s physical location
- Assurance the property is free from unlisted debts or encumbrances
- Warranty of clear ownership and title transfer rights
- Protection against prior claims or liens
- Commitment from grantor to rectify title issues
Pros and Cons
Pros:
- Ease of property transfer between sellers and buyers
- Title insurance can mitigate risks
- Useful for foreclosure properties
Cons:
- Limited buyer protection for previous ownership periods
- Narrow coverage focuses on grantor’s ownership
- Rarely used in residential transactions
Example of Special Warranty Deed Usage
Special warranty deeds may be more common in transactions involving foreclosed or bank-owned properties. For instance, suppose a couple in Mississippi defaulted on their mortgage. The property was foreclosed and transferred to a buyer via a special warranty deed limiting the selling bank’s liability to the period they held the title.
Special Considerations
A title search is essential in property transactions to uncover any potential liens or claims. Though typically extensive, these searches may miss some issues. Hence, buyers, irrespective of the deed type, often buy title insurance to protect against unforeseen financial claims.
FAQs
What Is a Special Warranty Deed Used For?
A special warranty deed is primarily used in commercial property transactions.
What Is a General Warranty Deed?
General warranty deeds are usually used for residential properties, offering broader protection to buyers.
What Are Other Names for a Special Warranty Deed?
Special warranty deeds are also known as covenant deeds, grant deeds, or limited warranty deeds.
Related Terms: general warranty deed, title insurance, property title, lien, clear title.
References
- State of Mississippi Judiciary-Administrator Office of Courts. “Henry Harvey A/K/A Henry Harvey, Jr. And Lillie May Moore Harvey A/K/A Lillie M. Harvey v. Federal National Mortgage-No. 2015-CP-00134-COA”.
