A special warranty deed is a type of general warranty deed used to transfer ownership from one owner (a person, group of people or entity) to a new owner when the seller cannot guarantee 100% ownership of the property they are selling.
The biggest difference between a special warranty deed and a general warranty deed is that the special warranty deed guarantees that there are no problems with the title during the time the seller owned the property, but it makes no guarantees about the time before the seller owned the property.
In other words, a special warranty deed provides less protections for the buyer than a general warranty deed, but both are still good and trustworthy.
Special warranty deeds are used for:
- Transferring real estate to a trust like a living trust
- Selling commercial property
- Transferring real estate to a business like an LLC
- Selling multi-family residential property
- Estate transactions for a deceased owner
- Foreclosed properties
- Real-estate-owned (REO) properties
- Short-sale properties
- When a builder sells a property
Both general warranty deeds and special warranty deeds offer the same general protections for a buyer, but the similarities do not have to make them confusing. There are differences too.
The Differences Between Specialty vs. General Warranty Deeds
|Special Warranty||General Warranty|
|Covers only the period of time that the seller owned the property||X|
|Covers the entire history of the property||X|
|Used for the sale of most residential real estate||X|
|Used in the sale of commercial real estate||X|
|Used after foreclosures||X|
|Used for REO properties||X|
|Used for short sales||X|
|Used when co-owners are transferring property between each other (ie. divorce)||X|
|Used for trusts and estates||X|
|Most common deed||X|
As you can see, a general warranty deed is most commonly used when the sale and closing process should be seamless. Special warranty deeds are used for more special circumstances like if you are buying a foreclosed property, a REO property, a short sale, etc. And that leaves an important question with special warranty deeds since there may be obstacles at closing.
Do I still need title insurance if I have a special warranty deed?
Yes you should still buy title insurance when you have a special warranty deed to protect you because there is no guarantee of ownership by the seller even though title insurance is not required.
If you’ve been presented with a special warranty deed while buying a house, don’t worry. They are very common, and now you know what to look for and how to protect yourself.