Are all deeds created equal? It depends. There are basically 3 different types of conveyance documents used in Hawaii. Here are the basics.
Warranty Deed
A regular warranty deed contains many covenants from the grantor. Among them, there’s a covenant that the owner really owns the property, that the property is being conveyed without undisclosed encumbrances, but most importantly, that the grantor will “warrant and defend” title to the property forever. The language of the covenants implies that the grantor has had some level of personal involvement or relationship with the property.
Limited Warranty Deed
A special or limited warranty deed, on the other hand, only warrants that the owner has the right to convey the property, and nothing has been done during their ownership to cause a defect in the title. Grantors such as bankruptcy trustees, personal representatives, lenders, or successor trustees take title only for legal purposes. They routinely convey by way of a limited warranty deed.
The increased use of a limited (special) warranty deed may be a sign of the times. In times past, these were mostly used by C. Brewer or other large landowners. For residential real estate, the use of a special warranty deed was the exception, not the rule. Foreclosures changed this.
Buyers (grantees) of foreclosed properties sometimes become concerned when they learn they are not getting a general warranty deed. The perception is that they are exposed to greater risk. With any foreclosure, all third-party claims should be wiped clean. Especially with non-judicial foreclosures, this is less certain. When a property is conveyed with this type of deed, I recommend that buyers pay a bit extra for an upgraded/enhanced title policy. Fortunately, post 2008 legislation all but eliminated non-judicial foreclosures.
Quitclaim Deed
Quitclaim (not quick) deeds are a highly misunderstood and often misused conveyance. With a quitclaim, the grantor conveys anything they own, even if it is nothing. These are commonly used to correct title defects or between siblings who wish to convey their interest to a brother or sister. A relationship between parties is probably the safest. Be sure to arrange title insurance early on if a quitclaim was the last conveyance. As with a deed-in-lieu, the deed may transfer title but the title insurer won’t issue an insurance policy unless they are given positive confirmation that all parties were fully informed with no undue pressure.
Bottom line, hope for a warranty deed, accept a special warranty deed and be cautious with a quitclaim. Knowing when to expect different types of deeds can be as important as what’s actually in the deed. Your REALTOR® will be able to recommend a good local real estate attorney who can best advise you in your situation!
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