What is a Limited Warranty Deed?

A limited warranty deed is a type of real estate deed that provides a limited guarantee of title to the property being conveyed. The grantor (seller) warrants that they have good title to the property and have not done anything to encumber or cloud the title. However, the grantor does not warrant that the title is free from all defects or claims.

Limited warranty deeds are often used in situations where the seller does not have a clear or marketable title to the property. For example, the seller may have inherited the property from a relative who died without a will, or the seller may have purchased the property at a foreclosure sale. In such cases, a limited warranty deed can provide the buyer with some protection against claims against the title, while still allowing the seller to convey the property.

Benefits of a Limited Warranty Deed

Limited protection against title defects: A limited warranty deed provides the buyer with some protection against claims against the title. If a third party claims ownership of the property, the buyer can sue the seller for breach of warranty.

Ease of transfer: Limited warranty deeds are relatively easy to transfer. The seller simply needs to sign and deliver the deed to the buyer.

Low cost: Limited warranty deeds are typically less expensive than other types of deeds, such as general warranty deeds.

Limitations of a Limited Warranty Deed

Limited scope of warranty: Limited warranty deeds only provide a limited guarantee of title. The grantor does not warrant that the title is free from all defects or claims.

No protection against prior liens or encumbrances: Limited warranty deeds do not protect the buyer against liens or encumbrances that were placed on the property prior to the seller's ownership.

No protection against future claims: Limited warranty deeds do not protect the buyer against claims that arise after the seller's conveyance of the property.

Considerations When Using a Limited Warranty Deed

When considering using a limited warranty deed, it is important to weigh the benefits and limitations of this type of deed. Limited warranty deeds can provide some protection against title defects, but they do not provide the same level of protection as general warranty deeds. If you are concerned about the title to a property, you may want to consider purchasing title insurance.

Common Mistakes to Avoid When Using a Limited Warranty Deed

Failing to disclose known title defects: The seller must disclose any known title defects to the buyer. Failure to do so can result in a breach of warranty and liability for damages.

Conveying the property without a clear title: The seller must have a clear title to the property in order to convey it to the buyer. If the seller does not have a clear title, the buyer may be able to rescind the sale or sue for damages.

Using a limited warranty deed when a general warranty deed is required: Some lenders require the use of a general warranty deed when financing the purchase of a property. Using a limited warranty deed when a general warranty deed is required can result in the lender refusing to fund the loan.

Success Stories

A buyer purchased a property at a foreclosure sale using a limited warranty deed. The seller did not disclose that there was a lien against the property. The buyer was able to sue the seller for breach of warranty and recover the amount of the lien.

A seller inherited a property from a relative who died without a will. The seller did not know if the relative had any outstanding debts or liens against the property. The seller conveyed the property to a buyer using a limited warranty deed. The buyer was able to obtain title insurance to protect against any potential claims against the title.

A developer purchased a large tract of land using a limited warranty deed. The developer was aware that there were some potential title defects, but the seller was unwilling to provide a general warranty deed. The developer was able to mitigate the risks by obtaining title insurance and conducting a title search.

What is a Limited Warranty Deed?