General vs Special Warranty Deed
What is the difference between a General vs Special Warranty Deed? To start, a “Deed” is the name of the most common document used to transfer title of real estate. And the most common deeds are the General Warranty Deed and the Special Warranty Deed.
The primary difference between these two deeds is the extent of the “warranties” the seller is giving to the buyer. There are three options:
These are not “warranties” as they relate to the condition of the property, such as the foundation or an air-conditioner. Instead, these are warranties of title or ownership of the property.
Good to know: Title is the legal right of ownership to property. A Deed is the document which is used to transfer property title.
These title warranties pertain only to the condition of the title to the property. NOT the condition of the structures on the property.
Warranty deed “AS IS” Clause
A Warranty Deed “AS IS” clause or provision refers only to the property condition. In other words, the condition of the structures on the land.
With an “AS IS” clause, the Seller is telling the Buyer that if something breaks, do not call the Seller. The property was sold “AS IS” as to the physical condition of the property. The Seller is making no promises to fix anything that breaks.
Good to know: Keep in mind that there may be legal exceptions to the enforceability of an “AS IS” clause IF the Buyer can prove there was fraud involved. Also, this type of “AS IS” provision does not apply to the condition of the title to or ownership of the property.
Special Warranty Deed vs General Warranty Deed in Texas
Getting back to the main difference between a Special Warranty Deed vs General Warranty Deed in Texas – the extent of the title warranties.
As a rule of thumb: Sellers prefer to use a Special Warranty Deed if possible, and Buyers prefer to receive General Warranty Deed if possible. The difference is the extent of the warranty of title being given by the signing party.
Warranty of Title
When you buy real estate, you want your seller to guarantee he or she really owns the property. This is referred to as the “Warranty of Title.” Seller promises Seller owns the property 100%. In other words, Seller is promising that no other person will claim the property.
Note: A Buyer also wants a guarantee or a promise that there are no liens or other claims to use the property. This warranty or promise is referred to as the “Warranty Against Liens and other Encumbrances.”
Good to know: Liens can include judgments, tax liens, child support liens, home improvement liens, or any other loan secured by the property. Encumbrances can include leases, licenses to use the property, or any other claim that prevents the Buyer from 100% use of the property.
If there are two names on the deed now and you want to remove one name, it is common to use either a Special Warranty Deed or a General Warranty Deed.
The General Warranty Deed
A General Warranty Deed is a full warranty of title. Seller is promising that the Seller owns the property 100% and that there are no liens or encumbrances affecting the property except the items listed in the deed.
With a General Warranty Deed, if any problems arise later that impact the title or ownership of the property that were not listed in the deed, the Seller may have breached the warranty and may be sued, regardless of the problem.
Good to know: Keep in mind that potential problems listed in the deed are exceptions from this warranty of title. Common exceptions include current and future property taxes, the mortgage used to buy the property and roads that may be on the property.
A General Warranty is the best Warranty of title that a buyer can receive from a Seller.
The Special Warranty Deed
A Special Warranty Deed, on the other hand, has limited warranties of title. Additionally, it has limited warranties against liens and encumbrances.
With a Special Warranty Deed, if any problems arise after the deed is signed that affect the title or ownership of the property that were not listed as exceptions to tile in the deed, the Seller may have breached the warranty and may be sued by the Buyer, only if the problem arises “by, through, or under” the Seller.
With a Special Warranty Deed, generally, if the problem is not caused by the Seller, the Seller is not responsible for the problems to the title.
When are Special Warranty Deeds Used
A Special Warranty Deed is often used by Sellers to limit their liability. Generally, Sellers do not like to sign General Warranty Deeds.
Special Warranty Deeds are commonly used by builders and banks when they are transferring property. They are also common in commercial transactions.
From a buyer’s perspective, a Special Warranty Deed should be acceptable if you know and trust your seller, such as a family member, or if you have a title search or are receiving title insurance.
Note: With title insurance, the title company is guaranteeing the title. The exceptions will be listed in the title policy, so the Seller does not have to do so.
Good to know: Keep in mind that title insurance is just like any other insurance: it covers most problems, but not every problem. Read your title insurance policy carefully. It will have a standard list of “exceptions” from coverage that all title insurance policies have, and it will also have specific exceptions from coverage that apply only to your property.
A Special Warranty Deed is also commonly used when co-owners are transferring the property to each other, such as in a divorce or dissolution of a partnership. In these cases, since the transfer is from one owner to another owner, the owner receiving the deed should be familiar with the property and the condition of the title. In that case a Special Warranty Deed should be acceptable.
Note: A court order, such as a divorce decree, can also transfer title if the decree specifically describes the property. A Certified Copy of the Divorce Decree can be filed in the county property records to transfer title.
Tax Sale Deed
For further examples of warranties a property transfer might offer, consider a Tax Sale Deed. This deed will transfer property without any warranties. It is used when the owner fails to pay property taxes owed on the property. Usually at a public auction called a “Tax Sale.”
Another one is a Sheriff’s Deed. This deed also transfers ownership, but without any warranties, at a public auction called a “Sheriff’s Sale.”