Certain precautions must be taken when purchasing a home to ensure your safety. A warranty deed is one thing home buyers should know about because it protects the new owner the most. In this article, we’ll explain what a limited warranty deed is and how they work in Georgia and Ohio so that when you buy a home, you’ll be fully prepared for potential title issues. In addition, we will compare the limited warranty deed vs the general warranty deed.
What is a Limited Warranty Deed
With a deed, the seller (the grantor) gives the buyer (the grantee) the right to own the property. Of all the different kinds of deeds, the limited warranty deed is the best for the seller. During his ownership, the seller guarantees or warrants that the deed title is free of any claims. The limited warranty deed limits the seller’s liability and protects him from any debts or liens that were on the property before he bought it. An encumbrance restricts the owner’s ability to use or transfer owned property.
How Does a Limited Warranty Deed Work?
When you transfer a title with a limited warranty deed, you transfer assurances that the title was not tainted while you were watching.
The limited warranty deed doesn’t give as many guarantees about the title as a general warranty deed. But it gives more guarantees than a quitclaim, which does not say that a property is free of liens or other problems. A special warranty deed says that the person giving it away has the legal right to do so and that any known problems with the title are written on the deed in clear language. However, there is no guarantee against title defects caused by previous owners.
What Makes a Limited Warranty Deed Unique from Other Deeds
A key feature of a limited warranty deed is that it states that no claims were made against the title during the grantor’s ownership of the property. A quitclaim deed, on the other hand, only transfers what the grantor owns and doesn’t say that the property hasn’t been claimed by anyone else, either during or before the grantor’s ownership. On the other hand, a general warranty deed gives full protection and guarantees that there are no claims against the title, either while the grantor owned it or before.
When Using a Limited Warranty Deed
Because this type of title makes no promises about the overall condition of the title and only guarantees that no claims are placed against it during the grantor’s ownership, it is not the ideal deed that a real estate purchaser wants to receive. Someone who is paying full market value for a home for their family wants to know that there are no liens or claims against the property.
The limited warranty deed is most commonly used when a bank forecloses on a property due to an unpaid mortgage and then sells the property at auction. The buyer gets a great deal on the house, and the bank sells it quickly. A limited warranty deed is used to convey the property to the buyer (grantee). The bank only guarantees that no claims were made against the title while it owned the property. There are no guarantees about what happened before the bank owned the property. The grantee can protect themselves by purchasing title insurance, which will deal with any claims that arise.
Limited Warranty Deed Ohio
An Ohio limited warranty deed form is a deed that transfers Ohio real estate with a limited title warranty. In Ohio, the warranty of title is also called the covenant of warranty. It is the current owner’s promise to the new owner that the property’s title is free of any problems that haven’t been made public. Title defects include liens, confusing history of ownership (called a “chain of title”), and the inability to sell an ownership interest.
Ohio limited warranty deeds offer a limited warranty because it only covers problems that happen while the current owner owns the property. The current owner promises to defend the title to the property against third-party claims made “by, through, or under the [current owner] but against no one else.” That is, the warranty covers a claim based on something that happened while the current owner had the property, but not before. The new owner is responsible for problems with the property that have been there since before they bought it.
Other Forms of an Ohio Limited Warranty Deed
The Ohio Revised Code and Ohio courts refer to deeds that transfer real estate with a warranty of title limited to the transferor’s ownership period as “limited warranty deeds.” Deeds with a limited warranty of title are known as special warranty deeds, covenant deeds, or grant deeds in other states.
The terms “statutory warranty deed” and “limited warranty deed” are sometimes used interchangeably, but they are not the same in Ohio. A statutory warranty deed is a real estate transfer deed that is based on a legal model and includes a warranty of title. In the Ohio Revised Code, there are forms for both general warranty deeds and limited warranty deeds.
A statutory warranty deed in Ohio can thus be a deed with either a general or limited warranty of title. Furthermore, because Ohio’s statutory deed forms are optional, an Ohio-limited warranty deed can but does not have to, be a statutory warranty deed. Common law is the basis for limited warranty deeds, and you don’t have to use the model language given by the Ohio legislature to make an Ohio limited warranty deed.
How do Ohio Limited Warranty Deed Forms Relate to Other Ohio Deed Forms?
By giving an incomplete warranty of the title, Ohio limited warranty deeds spread the risk of title problems between the current owner and the new owner. There are two other statutory deed forms in Ohio that place all the risk on one party or the other.
- Form of General Warranty Deed. An Ohio general warranty deed form, also known as a warranty deed, transfers real estate with a complete title warranty. When signing a general warranty deed, the current owner extends four warranty covenants:
- Form of Quitclaim Deed. A quitclaim deed form in Ohio transfers the current owner’s present interest in real estate, if any, “without covenants of any kind.” A quitclaim deed places the new owner at risk for any unknown title defects. If a third party later claims the property, the new owner cannot assert a breach-of-warranty claim against the prior owner.
Limited Warranty Deed Georgia
Georgia’s real estate transfer laws must be followed by a special warranty deed, which is also called a “limited warranty deed.”
A limited warranty deed form is not provided in the Georgia Statutes. According to Georgia Statutes, a deed is valid if it is sufficient on its own to demonstrate what is going on. In Georgia, a judge of a court of record, such as a municipal court judge, a magistrate, a notary public, or a clerk or deputy clerk of a superior court can attest to a limited warranty deed. The type of transaction should be clearly labeled on a deed. A grantor’s promise to defend the title only against claims and demands made by, through, or under the grantor is included in a special warranty deed.
Georgia law (44-2-14) says that the grantor must sign and swear to or acknowledge a limited warranty deed. Anyone on the 44-2-14 list can attest to or acknowledge a deed signed in a state other than Georgia. Outside-of-state special warranty deeds must also be signed by two witnesses, one of whom can be the officer taking acknowledgments (44-2-21).
Except for notaries public and judges of courts of record, these officers can only certify such documents in the county where they were appointed (44-2-15). In Georgia, a limited warranty deed must also be witnessed by two people. When the special warranty deed is given to the clerk of the superior court to be recorded, it must come with a real estate transfer tax form that has been filled out.
Limited Warranty Deed vs General Warranty Deed
A limited warranty deed differs from a general warranty deed. While the word “special” may give a buyer the impression that the deed is of higher quality, the special warranty deed is less comprehensive. Because of the limited timeframe it covers, it provides less protection. Special warranty deeds are often used to pay off debts when a home is foreclosed on or sold by the court.
Consider a home that has had two previous owners before you. The previous owner was a hoarder, and the house and yard quickly fell into disrepair. The city’s code enforcement office issued fines to the owner, which were attached to the property. When the first owner fell behind on their mortgage payments, the bank foreclosed and sold the home to the second owner.
The new owner fixed the house and cleaned the yard, much to the delight of the neighbors. After ten years, the house is put on the market, and you purchase it using a special warranty deed. You decide to sell the house a few years later. However, because the code enforcement liens are still on the property, they may impede your sale. To free the title, you must at the very least satisfy the city’s lien.
Similarities Between General Warranty Deed vs Limited Warranty Deed
Both the general deed vs limited warranty deed identify:
- The name of the seller—the grantor
- The name of the buyer—the grantee
- There is a guarantee that the title will withstand any third-party claims to property ownership.
- The property’s physical location
- Other than those noted in the deed, the property is free of debt and encumbrances.
- The grantor certifies that they are the legal owner of the property and have the legal authority to transfer the title.
- The grantor warrants that the property is free and clear of all liens and that no creditor using it as collateral has any outstanding claims on it.
- Special warranties allow the seller and buyer to transfer the property title.
- Title insurance can help to reduce the risk of prior claims to the special warranty deed.
- It can be used to purchase a foreclosed home.
- Special warranty deeds provide grantees or buyers with limited protection.
- Special warranty deeds only cover the grantor’s or seller’s ownership period.
- Residential properties rarely use special warranty deeds.
Example of Special Warranty Deed
Most residential real estate deals use general warranty deeds, but there is one time when a special warranty deed is needed. This arena is reserved for foreclosed, real-estate-owned (REO), or short-sold properties.
Most homes owned by the Federal National Mortgage Association (FNMA), Housing and Urban Development (HUD), and banks are sold with this type of deed. The selling authority doesn’t want to be held responsible for anything that happened to the property before it was seized. This is one of the main reasons why special warranty deeds are used.
For example, in 2012, a couple with a home in Grenada County, Mississippi, fell behind on their mortgage payments. Wells Fargo Bank, their lender, foreclosed on the property in February 2013. Later legal documents say that Wells Fargo “transferred the property to FNMA through a special warranty deed.”
How to Acquire A Warranty Deed
You can get a warranty deed from the office of your real estate agent or the internet. All warranty deeds must have the date of the deal, the names of the people involved, a legal description of the property being transferred, a list of any problems with the title, and the buyers’ signatures. Warranty deeds only have legal weight if they are signed in front of a notary public.
A limited or special warranty deed is similar to a general warranty deed, except that it does not guarantee the whole chain of title. A general warranty provides more comprehensive protection for a typical home purchase. However, in certain situations and locations, a special warranty is the norm. Even a general warranty has risks because title chains can be long and complicated, with many deeds in play before the current buyer’s deed. Look into title insurance to cover any potential title issues with any deed.
The best practices for accepting a limited warranty deed are simple. Work with a qualified real estate agent. Perform a title search. At closing, obtain an owner’s title insurance policy. Before you sign a real estate deed, you should talk to a lawyer in your area about any legal issues that might affect you.
Frequently Asked Questions
What Are the Risks of a Special Warranty Deed?
In contrast to a general warranty deed, the seller is not liable for any title issues that may have arisen before they took possession. This puts the buyer at risk because they will have no legal protection against any potential title issues that may arise after the real estate transaction is completed.
What Is the Difference Between Title Insurance and a Warranty Deed?
A title company conducts a title search and checks public records for any problems or errors. A general warranty deed’s guarantees and disclosures allow the new owner to hold the former owner liable if there is a title defect or a claim is made against the title. The general warranty deed protects against a broader range of potential claims than the general warranty deed, such as competing estate wills or tax liens.
Is a special warranty deed okay?
If you intend to buy a house and the seller only gives you a special warranty deed, a title search SHOULD reveal any liens and encumbrances on the property that the seller is or isn’t aware of.
Is a warranty deed the same thing as a regular deed?
A warranty deed is not the same as a regular quitclaim deed. There is no warranty of good and marketable title in a quitclaim deed. A warranty deed includes five title warranties. If a buyer discovers a problem with the property title, they may be able to sue the title insurance company.
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