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, the transferee must deliver and accept it.

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. 

Suppose the buyer does not want to see such unforeseen issues, claims of ownership, or other rights related to residing in the whole or part of the property. In that case, the seller needs to provide a warranty on 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 giving the title to any person, the buyer, or an entity that acquires the title (like a successor).  

The warranty protects 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 an adverse title matter covered by the warranty, they lose the right to claim against the seller.

A special warranty deed is used in commercial investment properties, sometimes considered equivalent to the general, but it does not protect against unpredictable claims. So a buyer should prefer a general warranty to a special one.

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

The benefit of using a Special Warranty Deed

Transfer of Property – When one relies on a special warranty deed to transfer, it shows the owner has the rights to the property, and many jurisdictions and authorities worldwide accept it.  

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

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

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