You likely already know that a deed will transfer ownership of the property to you if you decide to purchase it. But did you realize that there are various deed kinds with varying degrees of defense against third-party claims? It is crucial that you comprehend the many kinds of acts and how they differ to determine the level of protection you will receive. We’ll go into more detail about the Special Warranty Deed vs. General Warranty Deed in Texas and when each is utilized in this piece.
What Is a Special Warranty Deed?
A special warranty deed is a real estate deed in which the grantor—the seller of the property—warrants only against things that happened while they owned the property. In other words, the grantor makes no promises regarding clear title issues that existed before they possessed the property.
How a Special Warranty Deed Works
The most frequent usage of special warranty deeds is in commercial real estate transactions. A general warranty deed is typically used in transactions involving single-family homes and other residential real estates. The general warranty deed must be used, according to several mortgage lenders.
Different states have different names for special warranty deeds, including covenant deed, grant deed, and limited warranty deed. Only the time the seller had possession of the property under a specific warranty deed is covered by the guarantee. Defects in a free-and-clear title that might have existed before the seller’s ownership are not covered by special warranty deeds.
As a result, the grantor of special warranty deeds is solely accountable for issues with the title that they created when they were the property’s owner. Any problems resulting from the prior owners are taken on by the grantee.
Special Warranty Deed Texas
A limited warranty of title is offered by the Texas special warranty deed form. With special warranty deeds, the party transferring the property assures that he or she has not taken any actions that could result in title issues, but he or she makes no representations of any events that may have occurred before the transfer. A special warranty deed is frequently used in Texas:
- To transfer assets to a trust that the transferor controls or receives benefits from, such as a living trust;
- To transfer assets to a corporation owned by the transferor, such as a limited liability company;
- For the sale of real estate that is either commercial or multifamily;
- To transfer ownership of a property to a new owner who does not care about the limited warranty of title and is acquiring title insurance on the property; or
- In any other situation where the current owner does not wish to be held legally liable for title issues that existed before their ownership of the property.
To be considered a special warranty deed in Texas, the document must contain specific text. Our deed preparation service automatically includes this phrase, which is legal in every county in Texas.
How a Texas Special Warranty Deed Form Works
It is possible to transfer Texas real estate with a limited guarantee of title using a Texas special warranty deed form. The Texas special warranty deed form’s warranty of title is restricted in that it only applies to the time when the preceding owner—the person signing the deed—owned the property. Prior owners offer no guarantees regarding what may have occurred before they possessed the property when they sign the special warranty deeds, but they do guarantee that they have not done anything that could result in title issues.
Texas Special Warranty Deeds by Other Names
Different names are given to deeds that offer a limited warranty of title depending on the state. The phrase “special warranty deed” is used in Texas and the majority of other states. But different states exist. A statutory warranty deed is a type of deed that is used in Alabama to grant a limited warranty of title. It is known as a “grant deed” in California. A covenant deed is what it is known as in Michigan. Additionally, it is known as limited warranty deeds in some states. Despite their differences, these phrases all relate to the same kind of action.
How to Draft a Special Warranty Deed in Texas
An example form for general warranty deeds is provided in Section 5.022 of the Texas Property Code. However, the parties are free to modify the deeds by adding new terms. In actuality, this form serves as the basis for both special and generic warranty deeds. The “give, sell, and convey” language in the vesting paragraph and the warranty clause are the main components. Special warranty deeds must be used to limit the warranty to the time of the signing of the deeds owning the property.
A special warranty deed must include all the components of other Texas deeds in addition to the correct vesting and warranty language. These components consist of a legitimate legal description, a declaration of consideration, and an explanation of how co-owners will hold title. The deed must also include the requisite notice of confidentiality rights and comply with all font size and page format standards set forth by Texas law. According to Texas law, the deed must also be signed and notarized.
Each Texas special warranty deed must be carefully designed to adhere to all requirements. Even small linguistic variations can have a big impact on the law. Our Deeds Generator creates special warranty deeds that adhere to Texas law and are acceptable for recording in all Texas counties since they were created by licensed Texas attorneys.
Special Warranty Deed vs. General Warranty Deed
A general warranty deed is an alternative to a special warranty deed, commonly referred to as a limited warranty deed. The special warranty deed is less thorough even if the word “special” may give the consumer the impression that the document is of greater quality. Due to the brief period, it covers, it provides less protection. Special warranty deeds are regularly utilized in residential property foreclosures and forced property sales to settle debts.
Consider a house where there have been two owners before you as an example. The initial owner was a hoarder, and as a result, the home and yard quickly deteriorated. The owner was assessed fines by the city’s code enforcement division, which were registered against the home. The home was sold to the second owner after the bank foreclosed because the original owner was overdue on their mortgage.
The new owner cleaned up the yard and fixed the house, much to the delight of the neighbors. They list the house for sale after ten years, and you purchase it using a unique warranty deed. You decide to sell the home a few years later. The remaining code enforcement liens on the property, however, could impede your selling. To at least release the title, you must fulfill the city’s lien.
Similarities Between General Warranty Deeds vs. Special Warranty Deeds
The general warranty deeds and the special warranty deed specify:
- A grantor is the name of the vendor.
- The grantee is the buyer’s name.
- The only debts or encumbrances on the property are those listed in the deed.
- Property’s precise location
- The grantor guarantees that the property is free and clear of all liens and that no creditors utilizing it as collateral have any pending claims against it.
- There is a promise that the title would survive any claims by any parties to the property’s ownership.
- The grantor guarantees that they are the property’s legitimate owner and have the authority to transfer the title.
- The grantor shall take all reasonable steps to perfect the grantee’s title to the property.
Pros
- The transfer of property title between the seller and the buyer is allowed by special warranties.
- The danger of earlier claims to the special warranty deeds might be reduced by purchasing title insurance.
- It is helpful when purchasing a foreclosed home.
Cons.
- The grantees or purchasers are given limited protection under special warranty deeds.
- Only the grantor’s or seller’s ownership period is covered by special warranty deeds.
- Residential properties do not frequently employ special warranty deeds.
When To Use Special Warranty Deeds
Special warranty deeds are rarely utilized in residential real estate transactions since they provide buyers with only minimal security. In reality, for risk mitigation purposes, many mortgage lenders want general warranty deeds when a property is transferred from the seller to the buyer.
However, special warranty deeds are frequently utilized in estate disputes. This is so that the properties can be sold to a buyer after being transferred from an executor of an estate or trustee of a living trust. Since the executor never owned the property, it stands to reason that they cannot be held accountable for any title issues. Separate warranty deeds should therefore be used to restrict their guarantees.
Additionally, where the grantor is unable to provide substantial warranties regarding the title of the property, special warranty deeds are sometimes employed. The foreclosure of a property by a mortgage lender serves as an illustration of this. In this case, it’s possible that the mortgage lender won’t be aware of the property’s past and won’t be able to provide the same amount of protection when it sells the home.
Mortgage firms are not the ones guaranteeing that the prior owners who went into foreclosure did not encumber the title; even though they may have done so. A special warranty offers the mortgage lender some defense against purchaser claims resulting from title encumbrances before foreclosure.
Conclusion
The most typical application of special warranty deeds is in commercial real estate transactions. Simply put, this is because commercial real estate ownership can have a long history of different owners; foreclosures, and other problems. To safeguard the existing owner of the business property, specific warranty papers are required.
Frequently Asked Questions
What is a special warranty deed in TX?
Texas Special Warranty Deed
The title is transferred using both express and implied promises in a Special Warranty Deed. The Grantor only guarantees the title from the period the Grantor has owned the land, unlike in a General Warranty Deed.
Who signs a special warranty deed in Texas?
The Texas Grantor must sign their name following the presence of two Witnesses or a Notary Public. Note that the Texas County Recorder’s Office, where this form is lodged, will only accept this document if it can be proven that the Texas Grantor’s signature was duly witnessed or notarized.
Is a special warranty deed OK?
A special warranty deed gives the buyer some assurances regarding title, but it does not provide total security. However, if additional safeguards are put in place, these kinds of acts may be permissible. By typing “special warranty deed” and the name of your state into a search engine, you can find the appropriate form to use.
How much does a special warranty deed cost in Texas?
SPECIAL Warranty Deed prepared for $195
Board Certified by the Texas Board of Legal Specialization in Residential Real Estate Law.
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