Special Warranty Deed What It Is and How It Works

The property deed is one of the most vital documents you will come across while buying a home. This is how the seller legally gives you ownership of the property. A special warranty deed is one form of deed you may come upon. But what does this mean? And, more importantly, should you buy a house with a special warranty deed?

To help you make the best choice, let's break everything down into easy-to-understand words.

What is a Special Deed?

In real estate transactions, a special warranty deed is a legal document. It ensures that the seller, sometimes referred to as the "grantor," has the right to sell the property as long they continue to possess it and that they have a valid title to it.

To put it another way, the seller promises that all through their time in possession of the house, they did nothing to harm the title. They do not, however, guarantee that prior owners did not have liens, unpaid taxes, or other legal troubles related to the property.

This is the primary difference between a general warranty deed, which provides complete protection for the duration of the home's existence, and a special warranty deed.

How Does A Special Warranty Deed Vary From Regular Deeds

The statement that there are no claims against the title throughout the grantor's ownership period is what differentiates a special warranty deed. In contrast:

Only the grantor's assets are transferred by a quitclaim deed; it offers no assurance that there are no other claims against the property, either now or in the past.

A broad warranty deed guarantees that there are no title flaws at all throughout any time period.

When Using An Individual Warranty Deed

When a bank prevents on a home because its previous owner failed to make mortgage payments, a special warranty deed can be used. The property is sold to a new buyer after the bank forecloses on it. For the time before the bank gained possession of the property, the new buyer was not covered by the special warranty deed that the bank gives them.

Should I Buy A House With A Special Warranty Deed?

This is the primary question, and the answer is based upon several factors:

1. Do you have Title Insurance?
Title insurance protects you from any ownership problems down the road, like unpaid taxes or lawsuits from past owners. Even if your deed doesn't provide complete protection, you are still protected if you get this insurance, which is usually suggested.

Therefore, as long as you have this safety net, you can purchase a home with a unique warranty deed.

2. Who Do You Buy From?
A special warranty deed is common when buying from a bank, builder, or investment company, as and it's usually nothing to be concerned about. However, it's important looking into as to why a typical homeowner would issue this kind of deed rather than a complete one.

3. Are You Willing To Take A Small Risk?
There is always some risk when buying a home. If you have a specific warranty deed, you may need to rely more on a thorough inspection and title insurance. You can still be getting a fantastic bargain if you don't mind it and everything else seems to be in order.

What Should Be In A Special Warranty Deed

To be legally binding, each sort of deed must have the following:

• The name and address of the individual transferring the property, usually known as the grantor.
• Name and address of the grantee, the person who gets the property
• The preceding deed contains the legal description of the property (which might be a description of property lines or a lot number).
• Statement indicating that the donor wants to pass the property to the grantee

To qualify as a special warranty deed, it must additionally state:

• Legal ownership of the property and the authority for passing on it belong to the grantor.
• During the grantor's time in possession, no creditor or other party has any outstanding claims against the property.
• The grantor merely guarantees that he or she has a clear title for the length of the ownership term; if there is a title issue during that time, the grantee is not entitled to reimbursement from the grantor. The assurance doesn't cover the time before the property was held by the donor.

Special Warranty Deeds And Title Insurance

There is a chance that a prior owner or creditor could bring a claim against the property when a buyer buys it under a special warranty deed. Buying title insurance at the time of purchase is the most effective way to protect yourself as a buyer. In order to protect you in the case that an old claim is ever made against your title, the title insurance company will initially confirm that the title is clear before issuing insurance.

Should I buy a house with a special warranty deed? It differs, but don't be afraid to think about it.

A special warranty deed can be entirely safe if you're dealing with experts, have title insurance, and understand what you're getting into. It's simply an alternate approach to selling.

Doing this kind of thing doesn't have to be a deal-breaker as long as you take appropriate measures. As long as you know what's involved, it can even help you discover a nice property at a lower price.