It is extremely common for a special warranty deed to be used in commercial transactions or where property has been seized by foreclosure. You should be dealing with an agent who understands the difference.
In many states, the title insurance will make the difference an academic one, since when you are covered by title insurance, all of the covenants in a general warranty deed are insured. Make sure you close at a title company and have a full title search. Again, you should be working with a realtor who knows this, or who can refer you to a title company that would know. It sounds to me like your realtor is doing absolutely nothing for you, and charging 3% for his trouble.
A special warranty deed is generally used in commercial transactions, but an individual could also use that form. The difference between the general warranty and special warranty deeds is that the warranty in the special warranty deed only applies to items that occurred while the owner owned the property. Here again, if the seller never really owned the property, the buyer could sue the seller for failing to convey title to the buyer.
But if there is a problem on the title to the property that occurred prior to the sellerâ€™s ownership of the home, the buyer could sue the seller for the breach of the warranty under the general warranty deed but not under the limited warranty deed.
1. Grantor warrants that they have received title
2. Grantor warrants, unless specifically noted in the deed, that the property was not encumbered during THEIR period of ownership.
In effect, it only warrants the title against THEIR OWN actions or omissions. They warrant nothing PRIOR to their taking title.
However, the state of CALIFORNIA views warranty deed and grant deeds and quitclaim deeds as the same thing. The grant deed conveys ownership and your title insurance company guarantees you against encumberances.