Special Warranty Deeds

We held a closing last week and the buyer was questioning why the title transfer was done by a special warranty deed. Special warranty deeds are usually produce by developers for new homes who have owned the property just long enough to build the homes. Likewise, Banks when selling foreclosure properties issue a special warranty deed.

General Warranty Deed vs. Special Warranty Deed:

The general warranty deed is a promise to the buyer that the seller will warranty any prior problems with title, while a special warranty deed limits the seller's promise to title problems that come up while the seller owned the property, but gives no warranty for problems prior to that time.

Generally in foreclosure transactions, like the builder, has no close relationship to the property and will not want to promise anything about the condition of title before they acquired the property through foreclosure.

Title insurance insures the buyer against past ownership problems, old liens, boundary issues, and so on. Even though there may be exceptions in the title insurance policy, and owners should know what their exceptions are. Make sure your client selects a good title company with an in-house attorney to make sure they take the time to explain what title insurance is and how it works!!