Both deeds pass fee simple title. The special warranty deed warrants the title against claims arising only from acts of the grantor. A general warranty deed warrants title against all claims period.
Obviously, a General is better than a Special, but most banks selling REOs give only Specials, even though they obtained title insurance after the foreclosure. They don’t want to be brought into litigation if some titile defect wasn’t cleared up in the foreclosure process.
Posted by John L on December 05, 1998 at 24:52:42:
Can someone give an explanation of what a Special Warranty Deed (corporate deed) is? What to watch out for? Pitfalls? Is it just as good as a General Warranty Deed (fee simple)?
Posted by John L on December 06, 1998 at 11:11:16:
Thanks for the answers. A few other things I’m curious about are…at closing, is the party that performed the foreclosure required to satisfy all liens and judgements the title company discovers, or does the Special Warranty Deed mean they are only paying those liens (i.e., taxes, mechanics liens, ect…) that arose in the time they (the foreclosing party) were holding the property?
Also, if a purchaser accepts a Special Warranty Deed, when they sell the property, can title be transferred with a General Warranty Deed, or will it have to be with another Special Warranty Deed? In other words, will there always be a ‘cloud on the title’ because of the foreclosure? I think I already know the answer to that one…just curious.
Thanks to anyone who wishes to shed some light on this.
Posted by Scott Britton on December 05, 1998 at 08:11:07:
John,
A “Special Warranty Deed” says that the Grantor has done nothing to screw up the title… and will warrant that fact… but will not warrant the quality of title previous to their ownership. In other words… get an Attorney or Title company to warrant title.
A “General Warranty Deed” say the grantor will warrant the title period. Still… it is always a good idea to have a Attorney or Title Company to verify the quality of the title. You never know how strong the Grantor’s Warranty really is… until you need it. If they don’t have the ability to clear up any title problems… the warranty wasn’t worth the paper it was written on.
Both of these deeds (and even a quit claim deed) can pass “good and marketable fee simple title”. But… it’s good business to have someone insure this fact.