# Special vs. General Warranty Deed: Key Differences and Uses Explained

![Special Warranty Deed](https://www.investopedia.com/thmb/eRny6cdJNF7W66s9tUfOYx2ExbI=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/Special-warranty-deed-4188798-FINAL-6b1d36d6fecb4cf9946163c3d77455dc.png)

*— Madelyn Goodnight / Investopedia*

## What Is a Special Warranty Deed?

A special warranty deed provides limited protection by only covering defects or title encumbrances that occurred during the current owner's possession of the property. Unlike a general warranty deed, which covers the property's entire history, special warranty deeds are often used in commercial transactions and foreclosed properties. Understanding these differences is crucial for both buyers and sellers to ensure a secure property transaction.

### Key Takeaways

*   A special warranty deed only covers defects or problems with the property's title that occurred during the grantor's ownership.  
    
*   Special warranty deeds are common in commercial transactions and certain residential sales like foreclosures or bank-owned properties.  
    
*   General warranty deeds offer more comprehensive protection by covering the entire history of the property's title until the time of sale.  
    
*   Title insurance is often purchased alongside any type of deed to protect against undiscovered liens or claims.  
    
*   The name special warranty deed can be misleading, as it provides less coverage compared to a general warranty deed.

## Understanding the Functionality of Special Warranty Deeds

Special warranty deeds are mainly used for [commercial property](https://www.investopedia.com/terms/c/commercial-property.asp) deals. In contrast, single-family and other residential property transactions typically use a general warranty deed. Many mortgage lenders require a general warranty deed.

In different states, special warranty deeds are also called covenant deeds, grant deeds, and limited warranty deeds. The guarantee covers only the period when the seller held title to the property with a special warranty deed. Special warranty deeds do not protect against mistakes in a free-and-clear title that may exist before the seller’s ownership.

Thus, the grantor of a special warranty deed is only liable for debts, problems, or other encumbrances to the title that they caused during their property ownership. The grantee assumes responsibility for any issues that arise from the previous owners.

## Exploring General Warranty Deeds

A warranty deed transfers ownership of commercial or residential property and includes specific guarantees by the seller. These guarantees ensure the property title is free of ownership claims, [liens](https://www.investopedia.com/terms/l/lien.asp), [mortgages](https://www.investopedia.com/terms/m/mortgage.asp), or other encumbrances not made by the seller.

A [general warranty deed](https://www.investopedia.com/terms/w/warranty-deed.asp#toc-types-of-warranty-deeds) covers the property’s entire history and guarantees that the property is free and clear from defects or encumbrances, whether they happened or under whose ownership. The general warranty deed ensures the buyer gets full ownership rights without legal issues with the title.

> **Important**
>
> The general warranty deed is the most common and preferred method for transferring real estate titles in the U.S.

## Comparing Special Warranty Deeds and General Warranty Deeds

A special warranty deed, also known as a limited warranty deed, is a variation of the general warranty deed. The term "special" might suggest higher quality to buyers, but the special warranty deed offers less coverage. It offers less protection due to the limited time frame it covers. For residential properties, special warranty deeds are often used in [foreclosures](https://www.investopedia.com/terms/f/foreclosure.asp) and [forced sale](https://www.investopedia.com/terms/f/forcedliquidation.asp)s to settle [debt](https://www.investopedia.com/terms/d/debt.asp)s.

As an example, imagine a home that has had two previous owners before you. The first owner was a hoarder, and soon the house and yard fell into disrepair. The city’s code enforcement department issued fines against the owner, which were attached to the property. The owner fell behind on their mortgage, and the bank foreclosed, selling the home to the second owner.

To the pleasure of the neighborhood, the new owner fixed the house and cleaned the yard. After 10 years, they put the home on the market, and you buy it using a special warranty deed. A few years later, you decide to sell the house. However, because the code enforcement liens remain against the property, they could encumber your sale. At the very least, you will need to satisfy the city’s lien to free the title.

## Common Features of General and Special Warranty Deeds

Both the general and special warranty deeds identify:

*   The name of the seller—the grantor
*   The name of the buyer—the [grantee](https://www.investopedia.com/terms/g/grantee.asp)
*   The physical location of the property
*   The property is free of debt or encumbrances other than those noted in the deed
*   The grantor warrants that they are the rightful owner of the property and have a legal right to transfer the title
*   The grantor warrants that the property is free and clear of all liens and that there are no outstanding claims on the property from any [creditor](https://www.investopedia.com/terms/c/creditor.asp) using it as collateral
*   There is a guarantee that the title would withstand any third-party claims to ownership of the property
*   The grantor will do whatever is necessary to make good the grantee’s title to the property  
    

Pros

*   Special warranties allow the transfer of property title between seller and buyer.
    
*   The purchase of title insurance can mitigate the risk of prior claims to the special warranty deed.
    
*   It is useful for buying a house in foreclosure.
    

Cons

*   Special warranty deeds provide narrow protection for the grantees or buyers.
    
*   Special warranty deeds cover only the period of ownership of the grantor or seller.
    
*   Special warranty deeds are not often used for residential properties.
    

## Real-World Example of a Special Warranty Deed

Although general warranty deeds are more common in residential real estate transactions, there is one area where the special warranty deed becomes the norm. This is for foreclosed properties, real-estate-owned (REO), or short-sold properties.

Most [Fannie Mae (Federal National Mortgage Association, or FNMA)](https://www.investopedia.com/mortgage/fannie-mae-loans/), [Housing and Urban Development (HUD)](https://www.investopedia.com/terms/u/us-department-housing-urban-development-hud.asp), and bank-owned residences sell using this sort of deed. Perhaps one primary reason for the use of special warranty deeds is because the selling authority has no wish to be liable for any situation concerning the property before the seizure.

For example, in 2012, a couple with a home in Grenada County, Mississippi, [defaulted](https://www.investopedia.com/terms/d/default2.asp) on the loan payments on the property. In February 2013, the property was foreclosed upon by their lender, Wells Fargo Bank. Subsequent legal documents indicated that Wells Fargo “conveyed the Property to FNMA in a special warranty deed.”

## Important Considerations for Special Warranty Deeds

Most times, a [title search](https://www.investopedia.com/terms/t/titlesearch.asp) will uncover any liens or claims to the title of a property. A title search is a review of available public records to determine the ownership of property. Attorneys, title companies, and individuals can complete title searches to verify ownership of property. While these searches are extensive, there is always the possibility that something will be missed.

For this reason, most buyers—regardless of the type of warranty deed they use—also purchase [title insurance](https://www.investopedia.com/terms/t/title_insurance.asp) when buying a property. Title insurance is an indemnity insurance policy that protects a buyer from financial claims against the title of a property they own.

## What Is a Special Warranty Deed Used for?

If you are involved in a commercial property transaction, you will most likely need to use a special warranty deed.

## What Is a General Warranty Deed?

If you are purchasing a home or other type of residential property, you will usually use a general warranty deed for your transaction with your mortgage lender.

## What Are Other Names for a Special Warranty Deed?

Covenant deed, grant deed, and limited warranty deed are all different names used by the real estate industry for special warranty deed.

## The Bottom Line

A special warranty deed provides limited protection to the buyer by ensuring that the grantor is responsible only for title issues that arose during their ownership. This type of deed is often used in commercial transactions or foreclosures, where a seller is not liable for title defects prior to their ownership. Buyers may mitigate risks associated with a special warranty deed through title insurance, which offers added protection against financial claims on the property. For residential transactions and greater protection across the property's history, a general warranty deed is recommended.

> **Article Sources**
>
> 1.  State of Mississippi Judiciary, Administrative Office of Courts. “[Henry Harvey A/K/A Henry Harvey, Jr. and Lillie May Moore Harvey A/K/A Lillie M. Harvey v. Federal National Mortgage Association](https://courts.ms.gov/images/Opinions/CO114783.pdf).”