April 2014 Newsletter

One Changed Word; One Big Difference

By and large and like many states, the purchase and sale of residential real estate in Georgia is governed by form documents generated by the Georgia Association of Realtors (sometimes referred to as “GAR”). Every year these forms are revised or tweaked in an effort to best account for the needs of the marketplace of buyers and sellers. The 2014 GAR Purchase and Sale Agreement calls for the Seller to convey title to Buyer by “Limited Warranty Deed.” This is a significant departure from the historical conveyance by “General Warranty Deed.”

What’s the difference? 

A “Limited” Warranty Deed from the Seller means the seller is only warranting title by or through it and is not making any warranty as respects the validity of title by way of prior owners of record. What is the practical effect? Let’s say the owner of the property three owners ago died and the property conveyed out of her estate or was foreclosed upon and that bank then sold the property. Under a General Warranty Deed the current owner/seller warrants the validity of that estate transfer or prior bank/REO sale; not so under a Limited Warranty Deed. 

Whoa Nellie! That “don’t sound right” and what do we do about it? Short answer: relax, we got it covered. Long answer: First, every closing will still involve a title exam pursuant to the Georgia Title Standards to assure as a matter of record the title is in order irrespective of the type of deed to be used. Second, and while a policy of ALTA Enhanced Owner’s Title Insurance always has been recommended by our office in every purchase closing, that recommendation is heightened even further with this downward revision in the quality of the deed being given by sellers under the 2014 GAR contract. Back to the real life example, if an heir of the estate “pops up” and makes a claim against your buyer as the new owner or the foreclosed upon person knocks on the door and says “what are you doing in my house?”, the title insurance company steps in to handle the claim thereby protecting the new owner, also known as your client. 

There are of course other revisions to the 2014 GAR contract and we commend each of you to make yourself aware of the revisions and their respective import. As always, please call us if you have any questions.

Written by: 
Douglas P. McManamy, 
(912) 691-0943 phone 
(912) 691-0947 fax
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