I’ve been selling a lot of foreclosures lately and noticed that most of the banks are conveying the property with a special warranty deed like builders often do. It’s odd because most people convey title to their property with a general warranty deed.
They’re both warranty deeds, so what the hecks the difference? It sounds like a lot of lawyer mumbo jumbo but in the big scheme of things, the difference between these conveyance instruments can be crucial.
A general warranty deed guarantees the home buyer that the seller will warranty any prior problems with title, not just during their ownership but anywhere along the chain of ownership.
For example, if 123 Main St. was built by Moe, then sold to Larry who sold it to Curly, then when Curly sells it to some other knucklehead, the title is guaranteed all the way back to when Moe owned it with a general warranty deed. If 123 Main St. was sold by Curly with a special warranty deed, then the chain of title is only guaranteed back to the days of Curly’s ownership. So if there was screw up in the way the title was conveyed between these 3 guys, then the new owner would be S.O.L and Larry and Moe would be taking it out on Curly when the new owner finds out there’s a break in the chain of title.
It’s because of such knucklehead maneuvers that we have title insurance to guarantee title in modern day real estate. That’s not to say everything’s gonna be O.K. with title insurance since there’s quite a few exceptions to the policy like any other insurance.
I’d probably be aware of those exceptions if I were buying a home from a builder or one from the bank. It might be a good idea.