Convert Special Warranty to General Warranty

[Account Closed]

Hi this is my first post and I have been reading all the useful information on this site.  I am happy to see that most people at BP are very helpful towards their fellow investors. 

I would like to know by what process can I get a Special Warranty Title converted to a General Warranty title, if I pay off the liens or second mortgages ? I have heard that I can go to the court and do a quite title or something like this.

I plant to participate in buying a home on Homesearch, and I know that they will convey a SWD. I understand their are some risk with county liens and, 2nd mortgages being attached to the property, that Imay inherit if I win the auction

[Henry Melair]

If I understand your question correctly, the answer is that it can't be done once the contract is executed and the transaction closed. Institutions most often give Special Warranty or Limited Warranty deeds. As a general rule, the type of deed you receive in these situations is non-negotiable. Your protection is language in your purchase contract requiring the deed provide you marketable title in fee simple and a professional title search and title insurance to cover you. The implication from your question screams that you absolutely need assistance and insight from an experienced, knowledgeable REAL ESTATE attorney to help you understand the risks and protections available to you in the type of transaction you describe. To proceed without assistance in this matter would be a huge mistake.

[Guy Gimenez]

@Account Closed

No such thing. The deed is the deed...it's not like a contract that you can change unless there was typo in the original deed in which a "correction deed" or similar form deed will be filed after the fact.  

[Account Closed]

thank you both for the responses, and I will welcome more input from other. From my understand this deed will not change. Does this mean that if I decide to sell the property later that there will be a problem if a buyer wants to use bank financing, will it be easily marketable just as a GWD ? 

[Christian Carson]

If you want your seller to give you better warranties, you have to get him/her to re-execute the deed, and probably buy title insurance. You can buy title insurance anyway, without conveying the property, so that's an alternative. It's probably not going to affect marketability if the title search does not turn up any defects.

Title and deeds are two different things. Title is the concept of rights associated with owning property, and the deed is a document evidencing transfer of title. Title, when good, allows you to legally keep others off your land. A deed without title is void.

Warranties of title are what differentiates the general warranty deed from the special warranty deed to the quitclaim deed.

In the time before real estate gurus and do-it-yourself deed prep kits, there were rules about when which deed was appropriate to use.

General Warranty Deed
When a property is conveyed to a purchaser for value, the buyer usually demands that the seller promise, or "warrant" that s/he has good title to the property, and that the buyer won't be harassed by any claims on their title. This warranty goes all the way back to the beginning of time, or the "root of title" as we call it. The seller usually pays for the buyer to get title insurance in order to insure against the risk of any adverse claims.

Special Warranty Deed
This deed didn't used to exist, but came into vogue for foreclosure sales and the like. The seller of this property promises or warrants that the seller didn't impair the title of the property while the seller owned it. No mention is made about any impairments or claims against title before the seller owned the property. 

Quitclaim Deed
This deed has traditionally been only used to cure defects in title -- like when a grandson may have inherited at 1/335 share in a property, but no one is really sure whether that's true, and a buyer has come along and needs to get the signatures of all the possible heirs before being secure in his title. These types of interests are typically not insurable, which is why the quitclaim deed is used. 

Here's my nit. The increased use of quitclaim deeds for bona fide real estate transactions is making title work more complex, and in turn, more expensive. A warranty deed is a good indication that title insurance was purchased, so a warranty deed was traditionally reliable for issuing title insurance. If a property has a string of quitclaim deeds, I might have to follow the root of title back many more years.

[Bill Gulley]

Great explanation Christian, a bit more as to the Special Warranty Deed for those here, as to Subject-To transactions. A seller may have impaired title or clouded title such as with a mortgage. The seller will warrant good title "excepting out" or not giving warranty as to a specific lien requiring the buyer to accept the obligation to clear that lien. States have different names for deeds, such may be called an "All Inclusive Deed" where a buyer accepts existing liens or encumbrances.

Another example, I would sell a property that has a 30 year commercial lease or an "Out Lot Lease" with a Special Warranty Deed as I would not give title assurances over the rights of the tenants. Since I had already assigned some of my rights in title to the tenant, I can't sell rights I don't have clear title to. When that lease ends, those tenant's rights expire and are no longer a cloud or impairment to good title.

There really is no need to re-warrant good title if the cloud to title is released or expires, at that point you have clear title regardless of how property was deeded to you. Once any title impairment no longer exists you can simply have a title insurance company issue an updated policy, but really I don't see the need for that, they would be insuring over a matter that no longer exists.

And, there is too much use and abuse of quitclaim deeds, they should never be used to convey a sale of property, except where a lender may require such, I don't agree, but they pay their attorneys big bucks to protect them so you may not have a choice. That matter can be cured by your title company. :)     

[Rick H.]

My simple explanation is this: 

A deed is a document that shows what was intended to be transferred at the time it is signed. 

No more, no less. 

You can clean up other aspects of title that remain later, including prior defects in the chain of title and liens, but the original deed and the nature of the interest(s) granted, do not change. And then there's the issue of delivery and acceptance.

A simple document, with lots of potential for twists in title.

[Lee Macky]

Question, if I have a Special warranty deed, can I or do I want to convert to regular deed? Will a bank lend on a special warranty deed?