Limited Warranty Deed

A deed contains “the name of the party to whom it is transferred (the “Transferee”) and the signature of the transferring party, signed in the presence of a notary.

To make it effective, it must be delivered and accepted by the transferee.

The main difference between the types of deeds is the warranties offered by the seller to the buyer that cover title matters and it may negatively affect the qualifying assets.

For example, it can cause unknown easements, interest in the asset, or encroachment. 

If the buyer does not want to see such unforeseen issues or claims of ownership or other rights related to, residing in the whole, or part of the property, the seller needs to provide a warranty of the title which lowers the risks caused by such uncertainties. 

The most commonly used agreement is the “general warranty deed” that can seal the transaction where the seller warrants to give the title to any person, or the buyer, or an entity that acquires the title (like a successor).  

• The warranty provides protection against impediment upon or interest in the home unknown to the seller, created before the seller acquired the title. 

• It provides one of the greatest protections to the buyer but if the buyer or the successor in interest suffers a loss due to adverse title matter covered by the warranty, they lose the right to claim against the seller.

• In commercial investment properties, a special warranty deed is used, which is, sometimes, considered equivalent to the general, but it does not provide protection against unpredictable claims. So a buyer should prefer a general warranty as compared to special.

•  A special warranty merely exists to spare the owner from any type of liability that may have existed before he got the ownership, where a general warranty implies the cause where the person who now owns the property has a right to transfer such property asset classes to a third party. 

The benefit of using Special Warranty Deed

• Transfer of Property – When one relies on special warranty deed to transfer, it shows the owner has the rights to the property and it is accepted by many jurisdictions and authorities across the world.  

• Such a document frees the owner from risks or liabilities that come before one assumes the ownership and if there is any flaw in the asset and if the flaw originated earlier, one may not have to pay any compensation for it. 

• It also shows the proof of ownership and the deed can be used in case of any dispute. 

 Since it serves as collateral, it can be used to secure loans from banks or some authorized financial institutions.