Warranty Deed Special Warranty Deed

Understanding Warranty Deeds and Special Warranty Deeds: A Comprehensive Guide

Choosing the right deed when transferring real estate is crucial. This article will delve into the key differences between a warranty deed and a special warranty deed, two common types of deeds used in property conveyances. Understanding these differences is vital for both buyers and sellers to protect their interests and ensure a smooth property transfer. We'll explore their definitions, implications, and when each type is most appropriate. This guide aims to clarify the nuances of these legal instruments, empowering you to make informed decisions regarding your real estate transactions.

What is a Warranty Deed?

A warranty deed, also known as a general warranty deed, provides the buyer with the strongest possible protection against defects in the title. The grantor (seller) makes several legally binding covenants (promises) to the grantee (buyer), guaranteeing the quality of the title and the seller's right to transfer ownership. These covenants typically include:

Covenant of Seisin: The grantor assures that they own the property and have the legal right to sell it.
Covenant of Right to Convey: The grantor promises they have the authority to transfer the property to the grantee.
Covenant Against Encumbrances: The grantor guarantees that there are no undisclosed liens, easements, or other encumbrances on the property (except those specifically disclosed).
Covenant of Quiet Enjoyment: The grantor promises the grantee will not be disturbed in their possession of the property by third parties claiming ownership.
Covenant of Warranty: The grantor guarantees to defend the grantee against any claims to the property and compensate for any losses incurred due to title defects.
Covenant of Further Assurances: The grantor promises to take any necessary actions to perfect the title if any defects are discovered.

Essentially, a warranty deed offers the buyer the most comprehensive protection against potential title issues. The grantor assumes significant liability, guaranteeing the title's validity throughout their ownership and beyond. This comprehensive coverage makes a warranty deed the preferred choice for many buyers.

What is a Special Warranty Deed?

A special warranty deed, on the other hand, offers a more limited warranty compared to a general warranty deed. The grantor only guarantees the title's validity during their period of ownership. They do not guarantee the title's validity before they acquired the property. This means the grantor is not liable for defects that existed before they took ownership. The covenants typically included in a special warranty deed are:

Covenant of Seisin: The grantor affirms they owned the property at the time of the sale.
Covenant of Right to Convey: The grantor confirms they had the legal right to transfer the property at the time of the sale.
Covenant Against Encumbrances: The grantor guarantees there were no encumbrances placed on the title during their ownership. This excludes encumbrances existing prior to their ownership.
Covenant of Quiet Enjoyment: The grantor promises that the grantee will not be disturbed by any claims arising from the grantor's ownership period.

The key difference lies in the scope of the warranty. A special warranty deed only protects against defects arising during the grantor's ownership. Any issues predating their ownership are the buyer's responsibility. This reduced liability makes it a less risky option for sellers, especially those inheriting property or purchasing it through a foreclosure.

Key Differences between Warranty Deed and Special Warranty Deed: A Side-by-Side Comparison

Feature	Warranty Deed	Special Warranty Deed
Warranty Scope	Covers title defects from all past owners	Covers title defects only during grantor's ownership
Grantee Protection	Maximum protection against title issues	Limited protection; buyer assumes prior defects
Grantor Liability	High liability for title defects	Lower liability; limited to grantor's ownership
Use Cases	Ideal for new property purchases	Common in foreclosures, inherited properties
Risk	Higher risk for grantor; lower risk for grantee	Lower risk for grantor; higher risk for grantee
Cost	Often requires more extensive title insurance	Title insurance may be less extensive or unnecessary

When to Use a Warranty Deed?

A warranty deed is generally the preferred choice for buyers because it provides the strongest protection. Here are some situations where a warranty deed is most suitable:

Purchasing new construction: The builder typically provides a warranty deed, ensuring the property's clear title.
Buying from a private seller: If a private seller wants to provide maximum assurance of the property's title, a warranty deed would be the appropriate choice.
Transactions where maximum protection is desired: In situations where the buyer wants to minimize potential risks, a warranty deed ensures comprehensive protection against any title defects.

When to Use a Special Warranty Deed?

A special warranty deed might be a more appropriate option in the following scenarios:

Inherited property: Heirs often use special warranty deeds because they cannot guarantee the title's history beyond their inheritance.
Foreclosure sales: Banks and lenders often use special warranty deeds because they cannot guarantee the title's status prior to the foreclosure.
Situations where the seller wants to limit their liability: In situations where the seller's knowledge of the title's history is limited, they might prefer to limit their liability by using a special warranty deed.

The Role of Title Insurance

Regardless of the type of deed used, title insurance is highly recommended. Title insurance protects the buyer (and sometimes the lender) against losses resulting from title defects, even those not covered by the warranty deed. Title insurance companies conduct thorough title searches to identify potential problems before the sale is finalized. Even with a warranty deed, title insurance provides an additional layer of security. The extent of the coverage offered by title insurance will differ depending on the type of deed used, with warranty deeds often requiring more comprehensive coverage.

Understanding the Legal Implications

Both warranty deeds and special warranty deeds are legally binding documents. It's crucial to consult with a real estate attorney to review the deed carefully before signing. An attorney can explain the implications of the covenants and ensure the deed reflects the parties' intentions accurately. Failing to understand these implications can lead to significant legal and financial consequences.

Frequently Asked Questions (FAQ)

Q: Can I change the type of deed used in a transaction?

A: The type of deed used is generally determined by the seller, although negotiation may be possible. However, it’s important to note that some sellers may be unwilling to compromise on the type of deed they wish to use.

Q: Is a quitclaim deed better than a warranty deed or special warranty deed?

A: No. A quitclaim deed offers the least amount of protection. It transfers whatever interest the grantor has in the property, but it makes no guarantees about the quality of the title. It is generally only used in specific circumstances where the buyer acknowledges the risks involved.

Q: What happens if a title defect is discovered after the sale?

A: If a title defect is discovered after the sale, the recourse available depends on the type of deed used and whether title insurance is in place. With a warranty deed, the grantor is liable for addressing the defect. With a special warranty deed, liability depends on when the defect occurred. Title insurance provides financial protection in many cases.

Q: Do I need a lawyer to review my deed?

A: While not strictly required, it’s strongly advised to have an attorney review your deed before signing. They can clarify any complex legal issues and ensure your rights are protected.

Q: Are there other types of deeds besides warranty and special warranty deeds?

A: Yes, there are several other types of deeds, including quitclaim deeds, tax deeds, and trustee’s deeds. Each has its own specific implications and uses.

Conclusion

Understanding the nuances of warranty deeds and special warranty deeds is crucial for anyone involved in real estate transactions. A warranty deed provides the buyer with the strongest possible protection, while a special warranty deed offers a more limited warranty. Choosing the right type of deed depends on the specific circumstances of the transaction and the risk tolerance of both the buyer and the seller. Regardless of the deed used, obtaining title insurance is highly recommended to protect against unforeseen title defects. Seeking legal counsel from a real estate attorney is always advised to ensure a smooth and legally sound property transfer. By understanding these key distinctions and the associated risks, you can make informed decisions to protect your interests in any real estate transaction.