Q: I am considering buying a property where the seller is offering a special warranty deed. Is this a problem?
In a general warranty deed (with English Covenants of Title) the seller promises the buyer that the seller has good title to the property. The seller also promises the buyer that the seller will personally defend against any defects or claims to the contrary, regardless when the
problems were created or arose. This deed provides the buyer with the highest and best form of title warranty from a seller. A special warranty deed provides less protection than a general warranty deed.
The special warranty limits the seller’s responsibility only to claims or defects that were created or arose during the time in which the seller owned the property -- and unlike the general warranty not to any time prior to that ownership. One can purchase owner’s title
insurance on a special warranty deed. This provides sufficient protection in my estimation – or at least as good as one is going to get – because quite often sellers simply do not have the resources to defend or pay anyway, you might not find them, and they could always file
bankruptcy. Of course, if the seller had purchased owners title insurance when they bought then that insurance company would defend them if they conveyed to the new buyers by General Warranty deed.
In summary, one should always seek a General Warranty deed, and only accept a Special Warranty deed where there is an institutional seller, a fiduciary seller (e.g. an executor), or a seller who simply will not budge and your buyers really want the house; and, in the latter case the buyers should always buy owner’s title insurance and have a 60 year search performed. In other words, I would not advise against a deal just because the seller is conveying by special warranty deed.
Feel free to contact us, or Brian D. Lytle at Lytle Law (757-595-5655), for questions specific to your situation. We'd love to help!
Are you looking to start the home buying process? Email us at concierge@lizmoore.com, we'd love to help! Or, click below to download our free Home Buyer's Handbook.
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