Special Warranty Deed

[J Scott]

A friend of mine is buying a house next week, and when he looked at the settlement package, he noticed that he's getting a special warranty deed (SWD) instead of a general warranty deed (GWD). I know the difference between the two, but I'm trying to figure out what exactly might be prompting the seller to transfer with a SWD instead of the standard GWD? My friend has asked the attorney handling the settlement, but the attorney represents the seller, so I'm not convinced my friend will get an honest answer.

Here are the two potential reasons I'm thinking:

1. The seller doesn't have title insurance from when he bought, and doing this would eliminate any future exposure the seller might have to claims prior to his ownership. I assume this is why banks sell foreclosures using SWD -- it eliminates their need to purchase title insurance during their short hold period.

2. I'm wondering if the closing attorney or title company may get a kickback by transferring using a SWD, since that would essentially eliminate the exposure to the seller's title policy.

#1 seems like a reasonable reason to do this, and I assume my friend's title insurance would protect him should any claims/issues arise.

I'm not sure if my assumption about #2 (the old title company paying to have the old title insurance "closed out" is something that really happens or not, which is why I'm asking this question. If that's the case, my friend would demand a GWD.

Does anyone know if #2 really happens?

Does anyone have any other ideas on why a seller might choose to convey using a SWD?

Lastly, any recommendations on how hard my friend should push back on this or any other questions he should be asking to ensure that any risk is mitigated? I realize it's easy to say, "He should just get title insurance and he'll be protected," (which I agree with), but I'm also trying to get a better legally understanding of the situation as well.

@Bill Gulley - Would love your take on this!