Have you ever heard of a special warranty deed from your real estate agent, or is this concept new to you? If so, you can set the question “What is a special warranty deed?” aside as this blog explains it in detail, along with a comparative analysis with other types of deeds and why it is important in real estate transactions.
What is a Special Warranty Deed in Real Estate?
A special warranty deed is a legal document that provides assurance regarding the property title and guarantees that this property is not restrained or affected by any issues while under the seller’s ownership.
However, although it offers various benefits, which we’ll discuss later, they come with one major challenge. The document does not guarantee the property’s title before the aseller acquires it.
Get A Free Mortgage QuoteSpecial Warranty Deeds – How Do They Work?
A special warranty deed comes into function when the grantor/seller transfers the property with two primary assurances to the grantee/buyer. As a buyer, you need to note that these guarantees are only bound to the seller’s ownership of the property, not before or after.
If you encounter any title issues or claims before the seller’s ownership, this will not be a part of the special warranty deed. The two conditions upon which your seller guarantees their property are as follows:
1.Selling Authority: The grantor must confirm that they have the legal right to transfer this property and that the property title is valid for the duration of their ownership.
2.No Restraints During Ownership: Secondly, the grantor guarantees no liens, restraints, or claims regarding the property during the time of their ownership.
Other Warranty Deeds – How Do They Differ From Special Warranty Deeds
To better understand “What is a special warranty deed?” we can do a comparative analysis with other types of deeds that are also common with real estate transactions. A special warranty deed is different from a quitclaim and general warranty deed due to its extensive guarantees. However, there is a difference between them as discussed below:
General Warranty Deed
When looking for the safest buying options, a general warranty deed presents high-level protection to you. By agreeing to the terms of the general warranty deed, the seller guarantees that the title is free from any defects and claims before, during, and after the seller’s ownership of the said property.
The seller will also provide you with all the warranties covering the property’s extensive history (even before their ownership). According to the general warranty deed, the seller is liable for any title issues you may encounter in the future, even if the issue had occurred before their ownership of the property.
Quitclaim Deed
Quitclaim deeds offer relatively lower protections to the buyer as the seller transfers everything directly to the buyer without any guarantees or warranties about the property’s title. According to the quitclaim deed, the seller is not responsible for any title issues in the present or from the past.
Even with their low protection offers, this deed is popular in situations where the property is shared between members of the same family or in cases of divorce settlement.
Why Should I Benefit From a Special Warranty Deed?
Understanding what is a special warranty deed involves knowing when and why it has to be used. The most common scenarios where a special warranty deed comes into use are discussed here:
Real Estate Transaction on Commercial Level
Special warranty deeds are frequently used to seal the deal in commercial real estate transactions. This is because commercial property buyers conduct extensive due diligence and might be comfortable with the limited guarantees special warranty deeds offer.
Foreclosures and REO Properties
If a bank or lender is selling a foreclosed property, a special warranty deed is their ideal partner! They can assure that no issues arose while the foreclosed or REO property was under their ownership. However, they cannot verify the property’s history prior to it being foreclosed.
Trust-Owned Properties
If a property is sold through a trust, a special warranty deed is perfect to provide limited guarantees to the potential buyers.
Key Takeaways of Special Warranty Deed
● By leveraging a special warranty deed, sellers can benefit from reduced liability since they are only responsible for the title issues that showed up during their ownership and not before that.
● A special warranty deed acts as a middle ground between a quitclaim, offering minimal warranties, and general warranty deeds, offering extreme assurances.
Setbacks of Special Warranty Deed
● Sometimes a buyer may inherit an unresolved property with previous title issues resulting in legal complications and additional costs that might make the deal less favorable.
● In the special warranty deed, the buyer receives a medium level of protection, and any issues related to the property’s title might not be covered.
How to Use a Special Warranty Deed?
You can make your property ownership informed and completely beneficial by following these steps while benefitting from a special warranty deed:
Prepare for the Deed: Set up a meeting with the seller and your legal advisor to carefully prepare the deal. It is important to mention all details and extensive descriptions of the property, along with the offered warranties.
Signing for Legal Binding: Sellers must sign the special warranty deed in the presence of a third party (preferably a notary public) to proceed with the legal binding process.
Delivery to the Buyer: Once the legal binding is approved, the signed deed is then delivered to the buyer who goes through all the terms once again before accepting it. Any changes expected in the special warranty deed must be discussed and redone here.
Deed Recording: To enhance security and confidentiality, this deal is recorded with the appropriate local government office to approve the public notice of the property’s transfer.
Why Should I Choose Special Warranty Deed Over General Warranty Deed?
Choosing a special warranty deed over a general warranty deed totally depends on the specifics of your real estate transaction, however, these are some credible options on why you should consider it:
Limited Liability for the Seller
Through leveraging from a special warranty deed, sellers can assure the liability of the property only for the duration they owned it. This typically benefits you if you personally know the seller or are knowledgeable of their reputation.
Pocket Friendly Transaction
To a buyer’s surprise, a special warranty deed is pocket-friendly as it is simple and doesn’t require any legal complexions. Additionally, the seller might also seal the deal on negotiable terms such as lowering the price further or offering other favorable terms since there are lesser risks of the property transference.
Simpler Transaction Process
If you are looking for a simple selling and buying solution, putting your trust in a special warranty deed might be the best decision. These deeds provide adequate assurance to go on with the real estate transactions without worrying about the transfer period.
Why It Matters
For guaranteed property transfer with limited protection guarantees, a special warranty deed best suits the situation. It is indeed a useful tool in real estate transactions that reduces the liability for the seller and guarantees that there are no restraints on property ownership such as title issues during the seller’s ownership.
To understand what is a special warranty deed and its related complexities, you can make the best decision possible to make a smooth property transfer with the most trusted partners!