What is a special warranty deed and which type of warranty is best to use? Find out here!

A deed is a legal document that moves the ownership of property from one person or entity to another. In an event of property development, you might have come across different types of deeds. Some of them include;

  • General Warranty deeds
  • Deeds with restricted or limited warranties that further include special warranty deeds, Bargain, Sale, and Quitclaim deeds, deeds by trusts, and deeds executed by courts.

You need to figure out depending on your situation, what type of deed you should use and when. Let’s dig further into the concepts and different types of deeds.

  • What is a Special Warranty Deed?
  • What do Commonly used deeds include?
  • Types and differences between the property deeds
    • General warranty
    • Special Warranty Deed
    • Quitclaim Deed
    • Bargain and Sale Deed
    • Grant deed
    • Court orders deed
    • Deed of Trust, Trustee’s deed, and Reconveyance Deed
  • General vs special warranty deed – Which one should I use?
  • What’s in it for the seller?

What is a special warranty deed?

A special warranty deed is considered as a deed for real estate in which the seller of the property – known as the grantor warrants against anything that occurred during physical ownership. In a simple context, the grantor mainly doesn’t guarantee against any defects in clear title which existed before they were taken into possession of the property.

Special warranty deeds are commonly used with transactions associated with commercial property. Residential property and single-family transactions will usually require a general warranty deed. Moreover, different mortgage lenders insist on using general warranty deeds.

What do Commonly used deeds include?

  • General warranty deeds
  • Deeds with restricted or limited warranties
    • Special warranty deeds
    • Bargain and Sales deeds
    • Quitclaim deeds
  • Deeds held by the trust
    • Trustee’s deeds
    • Reconveyance deeds
    • Deeds of trust
  • Deeds executed by courts
    • Executor deeds
    • Master deeds
    • Administrator deeds
    • Sheriff’s deeds

Several legal deeds perform other special purposes such as a correction deed to help people to correct any mistake done in the previous deeds. To release the property held due to the security of loan payment, a deed of release is used. Every property deed comes with certain limitations and guarantees for buyers. To know about the deeds and how they work, let’s dig deep inside them.

Types and differences between the property deeds

General warranty

Traditionally, General warranty deeds are most preferred because it provides the broader protection for the property purchasers as the sellers continuously provide warranties of the property from the beginning of time. 

A general warranty deed is the most preferable deed for real estate transferring purposes. It assures that:

  • The seller should hold the complete title with the proper right to sell the property. Plus, the prior owners of the estate also possess good titles to make a reliable chain of ownership.
  • The estate is out of any liens, encumbrances, or any other obligation that the deed does not define or is not listed on the deed.

Therefore, the seller has to provide every detail of the property before selling it to the buyer and must defend if the validity of the title comes under question and becomes an alleged defect even after selling the property.

A defect on the other side holds a property to be sold at the asked price till the defect is remedied. Examples of some common defects of real estate include liens, legal verdicts against the title, or encumbrances. In case if the deed is incorrectly executed, recorded, or transferred, a defect on the estate can also occur.

Special warranty deed

Special warranty deeds assure the buyers that their investments will remain safe and protected. Sellers often use Special warranty deed forms for the transfer of the property between the potential parties. Special warranty deed mostly makes similar warranties as to the general warranty deeds, but the main difference to note for General Warranty deed vs special warranty deed is the assurance that general warranty provides to defend the defect of the title that might come into light when the estate is in seller’s possession.

In a Special warranty deed, the seller does not make warranties for the defects or the problems that arose when the estate was in the prior owner’s possession. What it means for a purchaser is that the seller will not defend the buyer if anyone claims a defect in the estate before the seller had possession of the property you bought. The seller will be accountable only for those defects and the liabilities that the property bears when the seller had owned it. 

Quitclaim deed

If an owner of a real estate property wants to transfer it quickly to another owner of the real estate with the least steps of transfers, quitclaim deeds are used. It is also considered the fastest and cleanest way to name your property to someone else.

Whether the title of the property is cleared or defected, using the quitclaim deed does not assure any warranty for the encumbrance or liens against the estate. The deed is often used among the family members, a trust, or in unfortunate conditions to a mutual trust as it is the quickest way to transfer the estate between each other. Furthermore, the quitclaim deed is also used to settle property claims after divorce and for the sale of tax deeds. 

Bargain and sale deed

To comprehend the basics of bargain and sale deed, you need to see what your state laws say about it. According to general state requirements, your bargain and sale deed should meet the following requirements:

  • The details of the person transferring the title/ grantor’s details
  • The details of the person receiving title/grantee’s details
  • A complete statement that represents that the estate is being transferred from the grantor to the grantee.
  • The legal title or the legal status of the property (either it is under dispute or clear)
  • An official description of the property including the chain of owners
  • The date of the deed execution and the signature of the grantor

However, these requirements are almost mandatory for every deed that involves property transfers. But unlike bargain and sale deeds, other deeds require the warranties and the defense statements from the seller and additional requirements of prior owners.

State laws also require the deed to be signed by one or two witnesses in the presence of a notary to avoid any legal misadventure. The local notary has to sign the deed as well.

Particularly in the Bargain and Sale deed, the seller transferring the title to the new owner does not take the guarantee for defects and claims. If a bargain and sale deed represents additional guarantees, it would be called a bargain and sales deed with covenants that typically make it similar to the special warranty deed.

Grant deed

 As for the grant deed, it transfers the property in the name of the grantee with the significant interest. The interest is added by the seller while finalizing the initial agreed-upon price. By doing this, the property is guaranteed that it is being sold free from any interest or debt. Grant deeds do not provide a guarantee regarding any defect that may arise down the road.

Court orders deed

Some different types of deeds include court order deeds. They are created without the consent of the broker or seller. They include master deeds, sheriff’s deeds, executors and administrators deeds, and any other type that does not require the owner’s consent like a will for instance. Most court order deeds hold the price of the property.

Deed of trust, trustee’s deed, and reconveyance deed

Since your real estate can be transferred by a trust, you can use three different types of trust deeds for legal purposes based on the grantee and grantor (trustor). The trustor or the grantor is the one who creates the trust, the benefiting party is called the beneficiary, and the fiduciary administering party of the trust is the trustee.

  • A Deed of trust is the deed that transfers the titles to the trustee from the trustor/grantor, to benefit the beneficiary. Oftentimes, states used the trust deed in place of a mortgage, when the trustor grants the deed to the trustee as loan security lends to the beneficiary.
  • A reconveyance deed is made when the title of the property or assets is taken back from the trustee to the trustor. For instance, after paying back the loan, the assets are taken back.
  • A trustee’s deed is used when the title is given to another party, usually a beneficiary. The deed should represent that the deed was implemented according to the state law conditions and terms of the trust.

General vs special warranty deed: Which one should I use?

Whenever financial transactions are involved, buyers are most inclined towards the proper and complete transfer of assets. The majority of the property transactions demand general warranty deeds which provide no hesitation to face any ramifications after the transfer of the estate in the future. Due to this, the buyer normally requires full title insurance and that can be given through a general warranty deed.

Special warranty deeds, on the other hand, are used mostly by the contractors or builders as they just want to complete the construction on the land and sell it without making promises regarding prior owners. These special deeds are also used for commercial purposes as the seller and buyers are normally involved in the foreclosure actions as the parties don’t really involve themselves in a property for a longer period and usually avoid giving assurance of the prior owners listed under the chain of titles.

What’s in it for the seller?

Indeed, the grantor or seller of the property would logically consider a special warranty deed. As a seller, you are always in a position to negotiate for a special warranty deed, however, you shouldn’t always expect the buyers to agree. The purchase agreement should clearly state the type of deed to be considered, and typically it can’t be changed at the last minute of the settlement table.

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