Realtor Forms Provide for General Warranty Deed from Seller

Question:  In a recent column you discussed the differences between a special warranty deed and a general warranty deed. My understanding from your column is that in more than 90% of commercial/industrial sales, vacant lot sales, and new home sales in Arizona, the seller only furnishes the buyer with a special warranty deed. In resale home sales, however, the standard Arizona Association of Realtors Residential Resale Real Estate Purchase Contract (“AAR Resale Home Contract”) provides for a general warranty deed from the seller to the buyer. Why does this AAR Resale Home Contract provide for a general warranty deed and not a special warranty deed?

Answer: The AAR Resale Home Contract and more than 100 other real estate forms used in Arizona are drafted and published by the Arizona Association of Realtors (“AAR”). AAR members are real estate agents and brokers who represent both sellers and buyers in real estate transactions. Therefore, the AAR forms are generally neutral, and don’t favor the seller or the buyer. The AAR forms committee specifically responsible for the AAR Resale Home Contract is comprised not only of real estate agents and brokers, but of representatives from the title industry and the mortgage industry. As discussed in recent columns, a general warranty deed increases the liability of a seller to a buyer, which decreases the liability of a title company to the buyer under the buyer’s title insurance policy. Therefore, the title industry promoted language in the AAR Resale Home Contract providing for a general warranty deed.

Note: The title industry also promoted language in the AAR Resale Home Contract stating that the title company had “sole and absolute discretion” to decide whether the seller or buyer gets the earnest money if the purchase contract is canceled.