Fellas,

As long as I get an owner's title policy on a piece of property, are there any serious risks that I need to be aware of as the buyer in accepting a 'Deed without Warranty' in Texas?

The seller is a giant multi-state Fortune 500 company that's gone through several mergers, acquisitions and buy-outs, and that's the only way they'll transfer it. I can take it, or I can leave it.

Thanks.

Have you confirmed that you can obtain title insurance in this scenario?

Dan,

Yeah. Per the LOI, the seller is to provide (and pay for) the title policy.

But, more to your question, I haven't (yet) seen the commitment.

Depending on what the commitment says, you should be able to back out during your due diligence period if necessary.

Are you borrowing money? Let your lender take a peek at it as well.

They should at least give you a Special Warranty Deed.

Martin Cash said:

---

They should at least give you a Special Warranty Deed.

---

If those are even worth a damn anymore after Cochran. Tx Supreme Court needs to hurry up and overturn that nonsense.

And to answer OP, a deed without warranty is a valid way to convey title but you would have no recourse against the seller for any title issues. You may have a title policy (definitely check with the title company, most wont insure behind a deed without warranty) but your title policy only covers certain losses and things are excluded and excepted from coverage. Plus making a title claim isn't the easiest process.

Quote:

---

If those are even worth a damn anymore after Cochran. Tx Supreme Court needs to hurry up and overturn that nonsense.

---

I hadn't heard about Cochran.

If I understood it correctly (may not have), Cochran held that unless the Grantor explicitly states in the deed that they own the property, the Grantee can be SOL on a Special Warranty Deed.

The SCOT heard oral argument on January 30, 2020. We await the decision.

Quote:

---

You may have a title policy (definitely check with the title company, most wont insure behind a deed without warranty) ...

---

I knew that w/r/t Quitclaim deeds, but I've never had to take a Deed w/o Warranty before. The seller selected First American Title, so I guess I'll know shortly.

Thank, guys, for all your input. I appreciate it.

Kurt - to your question, there's no lender involved on this one. I'm flying solo.

Yeah basically right on Cochran. You can still probably rely on Special Warranty Deed, should just have seller specifically include a covenant of seizen (#SZN).

Not for your specific transaction because Fortune 500 company will prob tell you to pound sand.

As far as deed without warranty and title company, it's gonna come down to risk determination on their side, I.e what's the transaction size, what's the chain of title look like, etc. They obviously prefer General Warranty Deed or at least Special Warranty Deed (with covenant of seizen) so if you file a successful claim they can attempt to go after seller.

Quitclaim deeds are problematic for different reasons.

I've seen instances where a seller refused warranty deed and title insurance could not be obtained. It was due to a ton of diy quitclaim deeds that muddied the title. Ultimately had to do a quiet title before the transaction could be done with a warranty deed and title insurance (not in TX. First American was the title company). It took first american almost 2 months to dig into the title at first before they came back and said no to insurance.

Ribeye:

Just saw your post....sorry. My business is buying non-performing, commercial loans from banks and insurance companies secured by commercial real estate. We wind up foreclosing in about 90% of the cases.....so I've sold about 50 commercial properties in 17 states over the last ten years that were acquired thru foreclosure. We never offer a general warranty deed when we sell as we always acquire thru foreclosure (always...even if it is a friendly foreclosure on a non-recourse loan) just to have a more clear title.

We always sell with title insurance (chosen by buyer) and with a special warranty deed. Buyer/title company always asks for a general warranty deed....we always say "no" and will always do that. We just can't warranty anything prior to our ownership...only during our ownership. Thus far, our refusal to give a general warranty deed has never killed a transaction. Our buyers have the title insurance policy from the title company they have chosen with the non-cleared, title exceptions they are comfortable with.....they also benefit from a recent foreclosure action (and it's title clearing impact), and they receive our special warranty covering our period of ownership.

I wouldn't hesitate to buy in those circumstances.....especially since most commercial properties are owned by SPE's that have little meat on their bone once a property is sold thus limiting the value of the general warranty deed they give you.

I would add....when we buy loans we always do so with a title policy and yes, we have collected large sums on a couple of those policies....loan origination policies which were transferred to us as lender when we bought the loan. It can take a year to collect on one....so we would never buy a note knowing we will need to file a claim on a title policy, but it does provide meaningful coverage in my opinion. Lots of crooks out there....a good title policy (only as good as the exceptions) with a good title insurance company is very comforting.

Oh yeah....I'm not an attorney and this is not legal advice....just my own experience.