Limited Warranty Deed? Need some help

6 Replies

Hello, I am buying a house from a local bank as a limited warranty deed. I'm a bit confused why not as a general warranty deed. Are they trying to hide something? Should I request I get a warranty deed instead of limited? Any thoughts would be grateful. Thank you.

REOs are often sold with less than a full general warranty deed. Buy title insurance. They won't give you a general warranty deed.

Ok, so I am safe as long as I get title insurance most likely? Thank you guys.

I would say the majority of banks use what is called a "Special Warranty Deed", which sounds "less threatening" than a deed called a "Limited Warranty Deed".

(...or maybe some states use a "limited warranty deed" while other states use a "special warranty deed"? All the banks I've done REO deals here in Florida use "special warranty deeds"!).

My last 50 properties from banks:

47 - via Special Warranty Deed
3 - via Quit Claim Deed

Banks seem to "have a fear" of exposing themselves to extra liability when they sell REOs,

so banks, in their wisdom, mostly use Special & Limited Warranty Deeds in lieu of a regular Warranty Deed when transferring title on REOs.

Banks also use "special addendums" or added language in the "additional terms section" of a real estate sales contract to even further insulate themselves from liability.

Sometimes an investor can use the bank's paranoia and fear of liability to their advantage:

I recently purchased (3) REO vacant lots from a major bank (BB&T). I submitted my offer, as I usually do, but this time the bank said they would only sell these three properties to me via a "Quit Claim Deed".

The problem was, almost all title insurance companies will not get involved with title work and not issue title insurance, if a "Quit Claim Deed" is used to transfer title!

I really wanted these (3) lots, so I "dug deep" into "chain of title history" to see just why a bank would refuse to sell me these lots only via a "quit claim deed"?

I learned that these three lots were part of a huge group of properties that were "Quit Claimed" to BB&T Bank from a land developer via a "Deed-in-Lieu of Foreclosure" agreement.

And I further noticed that the title company used was owned by this land developer, and the "Deed-in-Lieu of Foreclosure / Quit Claim" documents were drawn-up by the land developer's own lawyer (...who was also the lawyer for the title company! Yikes!).

Now I kind of understood BB&T's motive in wanting to transfer these lots only via a "Quit Claim Deed". But that didn't help me much as I would have to buy these (3) REO lots without title insurance, ...and that did scare me!

So here's what I did: I convinced a title insurance company (who uses their own "in-house searcher" to do the title searches as a "prelude to getting a property underwritten for title insurance issuance.") to do a free title search for me, with the understanding that they would get the "back end" title work from my end buyers.

So this small town title company said ok! They did the search, and then they made their money by closing these (3) lots to two end buyers with title insurance!

They did that only days after the BB&Ts "quit claim deed" was filed and these 3 lots were transferred to me. So in other words once the property was in my name (regardless of obtaining them via a "quit claim deed" or not), I was able to sell them right away, via a full warranty deed with title insurance to my ebay buyers.

So I bought the (3) REO lots from BB&T Bank, without title insurance (and zero closing costs I might add!). So just a few days after I closed with the bank (of course my title company requested to review the "quit claim deed" and make sure it was drawn up correctly by BB&T Bank's lawyer, with proper legal descriptions, etc. And all was indeed ok!).

I resold the lots with full title insurance, thanks to this small title company!

So all worked out perfectly for me.

But I hope I never have to buy another REO property via a "Quit Claim Deed"!


Land Rescue League, LLC

Just a follow up to Bob's post above about buying three REO lots via QCD without title insurance, and subsequently selling the lots with full warranty deed with title insurance. In this case, if there is a challenge to the title, the current owner (the buyer) of the lots can look to his title insuance company for defense. Then by the rule of subrogation, the owner's title insurance company can sue the seller to recoupe the loss stemming from the claim. Since the seller, during his ownership, never had a title insurance with him being the insured. Is this correct?

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