Special Warranty Deed
Special Warranty Deed is a type of deed that you will encounter when dealing in buying and selling real estate. Warranty Deeds are used for real estate sales where either residential or commercial properties are transferred between parties who are unfamiliar with each other. This type of deed is a guarantee from the seller to the buyer about the history of the property being sold, though what it is exactly guaranteeing depends on the type of deed.
Special Warranty Deed and General Warranty Deed
There are two types of Warranty Deeds: A General Warranty Deed and a Special Warranty Deed. While the two are similar up to a point, there are key differences between them, and a smart investor is able to remember the difference.
What both the General Warranty Deed and the Special Warranty Deed cover:
- That the seller owns the title to the property.
- That the seller is legally allowed to sell the property.
- That the property has not already been sold.
- That the property is free of debt or other claims.
- That the seller is responsible for any problems or faults with the property.
And that’s just about where the similarities end. While a General Warranty Deed (which is usually standard and required for most sales) covers the entire chain of ownership, guaranteeing that there are no pending legal actions or title issues through an unbroken chain of ownership, a Special Warranty Deed covers only the history with the current owner. The idea of the property having an unbroken chain of free and clear ownership throughout its history is questionable, and the seller can only claim there has been no legal actions or suits during the tenure of his or her ownership. This means that any pending lawsuits, which can take years to be resolved, can affect you negatively after the title has been passed on to you.
The most common place to see a Special Warranty Deed in place is when you’re settling on a foreclosure – where more often than not, the house is being flipped, and the current seller has no real personal experience or history with the property other than the work and remodeling put into it.
If you find yourself entering into a property that does have a Special Warranty Deed instead of a General, there are ways to protect yourself against any legal actions that might pop up. While getting title insurance is a good idea for protection anyway, looking into the Enhanced Owner’s Title Insurance Policy is a great idea. There is a standard version available as well, but the enhanced policy covers a great deal more. Building Permit Violations, Post Policy Forgery Protection, and Automatic Inflation Protection (up to 125%) are just a few of the perks of upgrading to the enhanced policy.