Title Insurance Company Can Discover Deed Problems

Added May 8, 2006 by Ilyce R. Glink and Samuel J. Tamkin

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Summary: Is a general or special warranty deed better for selling property? When selling a residential property, the type of warranty deed you use, or title, isn't so important. A special warranty deed is usually used for commercial real estate sales. During the home sale process, a title company will run a title search and discover any problems with the deed or title. Usually a general warranty deed is used when selling a residential property.

Q: When selling property, is it better to give the buyer a general warranty deed or a special warranty deed?

A: For all practical purposes, it probably won't matter to you what kind of a deed you use when transferring residential property to a buyer.

A general warranty deed will convey title to a buyer along with certain warranties of title from you, the seller, to the buyer. If it turns out that you sold the home and never really owned the home, the seller can sue you for breach of warranty given to the buyer under the deed.

A special warranty deed is generally used in commercial transactions, but an individual could also use that form. The difference between the general warranty and special warranty deeds is that the warranty in the special warranty deed only applies to items that occurred while the owner owned the property. Here again, if the seller never really owned the property, the buyer could sue the seller for failing to convey title to the buyer.

But if there is a problem on the title to the property that occurred prior to the seller's ownership of the home, the buyer could sue the seller for the breach of the warranty under the general warranty deed but not under the limited warranty deed.

However, the distinction between the two in residential transactions is technical and in practice it would rarely come up. With title insurance companies and most home buyers obtaining a title insurance policy, the process has become computerized and the records have improved. If there is something that affects a home buyer's title, the title company should have discovered it prior to closing. If the title company discovered it prior to closing and the closing agent or selling attorney listed that item on the deed, the distinction between the general or limited warranty deeds becomes irrelevant.

Finally, most practitioners will expect a general warranty deed from a seller and may become apprehensive if a limited warranty deed is delivered or even a quit claim deed. A quit claim deed makes no warranty as to what the seller is conveying. The seller may own nothing or may have good title. But if the seller owns good title, the buyer gets good title.

May 8, 2006.

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