Tips for Dealing with Limited Warranty Deeds

Tips on dealing with limited warranty deed.

Tips for Dealing with a Limited Warranty Deed

1. When using the GAR PSA form, all buyers should treat their purchase with the same scrutiny as they would an REO property, RELO or new construction.

2. Buyers who plan on declining title insurance at closing may want to consider the following options during negotiation–
  • Require the seller to deliver title instead by general warranty deed. Just because the GAR form removed the general warranty deed requirement does not mean that it cannot be negotiated back in the contract by special stipulation.
  • Obtain a copy of the seller's title insurance policy. This may enhance the interests of the buyer when conveyance is by general warranty deed. However, the record title should be carefully reviewed in concert with the title policy to determine if the policy may still be enforced against prior title defects– it may not. In addition, a prior policy may contain important exception information not disclosed by the current title exam.
  • Negotiate for the seller to pay for an owner’s title insurance policy. If a seller insists on conveying by limited warranty deed, it is reasonable to request that the seller pay for the owner's title policy.

3. Since the due diligence period is more important than ever, have that survey performed as early as possible. Get the survey into the hands of an experienced real estate attorney who you trust to have it audited against the title work. Believe it or not, surveys except to matters of title, so if the survey is not properly audited it removes a majority of the benefit of having the survey performed in the first place. Also, obtain a copy of the seller's title insurance policy for possible title exceptions not appearing in the current title search.

4. If you represent the seller, make sure the deed your client signs at closing is a limited warranty deed. A limited warranty deed is almost always titled “Limited Warranty Deed” but may also be titled “Special Warranty Deed” whereas a general warranty deed is usually titled “Warranty Deed.”

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