Are you planning to buy a new home? You will definitely need a deed to transfer the ownership of the home to yourself. There are different types of deeds and the level of protection that each of them offers against third parties is different from one another. The main examples here are general and special warranty deeds.
This article pays close attention to the special warranty deed. It will be looking at what these deeds are and when to use them. However, it is good to read more about a general warranty deed vs. special warranty deeds. It will help you make an informed decision on when to use what. The most important thing is to go for something that will give you the desired level of protection against third parties.
What Is A Special Warranty Deed?
A special warranty deed, in real estate, is a legal document that allows the seller of the property (grantor) warrants against those things that took place when they physically owned the property. What this implies is that the grantor does not provide a guarantee against the issues that took place before he was the owner of the property.
If you need the later kind of protection, you need to go for the general warranty deed. It forms the main difference between the general warranty deed vs. special warranty deed.
Therefore, in the special warranty deed, the grantor isn’t liable for any issues or debts that took place before they were the legal owners of the property. Therefore, if you discover an issue and the seller proves that it happened before he was the property owner, he will not be responsible.
What Is The Purpose Of The Special Warranty Deed?
Warranty deeds provide the transfer of title or ownership of a commercial or residential real estate property from the current to the new owner. It has certain particular guarantees that the seller makes.
The guarantees contain that the real estate property that the seller is transferring to the new owner is clear and free of outstanding liens, ownership claims, or other issues by entities or individuals against the property.
The main role of a special warranty deed is limiting the warranties that the grantor issues that occurred only when the seller was the owner of the property. Because of this, it is sometimes known as a limited warranty deed. Thus, this is a less comprehensive deed and gives buyers less protection because the timeframe that it offers the guarantees is limited.
The special warranty deed, as the name suggests, contains additional info in comparison to the standard information that is contained in a general deed. This is what makes the deed special. When analyzing the general warranty deed vs. special warranty deed, here is the info that you will get in both of them:
- The seller’s name i.e. grantor
- The buyer’s name i.e. Grantee
- Address or physical location of the property
- A statement that the seller has the intention of transferring the real estate property to the grantee
- A warranty that the seller is the rightful owner of that property and has the legal right of transferring that property into the buyers’ name.
- The grantor’s warranties that the said property is clear and free of all forms of liens and there aren’t any outstanding claims on it from third parties like creditors.
- A guarantee that the property title will withstand all the ownership claims from third parties.
- That the seller will do all things possible to make the property title good
To add to the information above, there are certain things that the special warranty must state. These are what makes it “special” or different from the general warranty deed. The special clauses include:
- The property does not have any outstanding claims instituted by creditors or individuals when the grantor was the legal property owner.
- Guarantees that the seller had a clear property title only during the time when they were under the ownership of the property.
- That in case the title has an issue before the grantor was the property owner, the grantee will not get any compensation from the grantor. Therefore, the guarantee doesn’t cover the time before the sellers become the legal owner of the property.
When Is A Special Warranty Deed Used
Special warranties tend to offer a limited level of protection to the buyer. As a result, you will rarely find people using them in residential property transactions. In fact, most mortgage financiers prefer general warranties when transferring the property to the new buyer to mitigate the level of risk.
However, most real estate matters use special warranties. The reason is the trustee of a living trust or executor of the real estate is the one transferring the property. You cannot logically hold the executor liable yet they never owned the property. Therefore, it makes a lot of sense to use a special warranty deed to limit the warranties.
Special warranties are also ideal when the grantor is not able to offer extensive warranties as the property title. For instance, a mortgage lender may not be aware of the previous history of the property hence limiting the level of protection that it offers while selling the property.
In most cases, special warranty deeds are utilized in commercial real estate transactions. The reason is that commercial real estate ownership tends to have an extensive history of foreclosures, multiple owners, etc. therefore, the current owner of the property needs a special warranty to protect him against any past liabilities.
If you are buying a new house, a deed is used to transfer its ownership. There are so many types of deeds and the special warranty deed is just one of them. To make an informed decision, you need to understand the difference between the various types of deeds. This article has been able to illustrate these differences clearly. If you still need clarification, feel free to contact a real estate professional.