What is a Bargain and Sale Deed? | Guide & Tips

bargain and sale deed

A Bargain and Sale Deed is defined as a legal document used to transfer the title/ownership of a property without any warranty that liens and encumbrances are non-existent.

Consequently, the grantee (buyer) inherits all liens and encumbrances linked to the property transferred. However, the deed warrants that the seller possesses the property title. Titles to property transfers made without any warranty deed are difficult to insure and protect against future claims.

Reasons to Use a Bargain and Sale Deed

There are a few reasons why bargain and sale deed is used.

A bargain and sale deed is used when the transfer of ownership of property is being done under the following scenarios:

  • Transfer of property between two familiar parties such as family members and family trusts.
  • Property transfer after a foreclosure or tax/estate sales.
  • Transfer of property through a court-ordered sale, for example, the sale of the estate of a deceased person.
  • Property transfers where the buyer is willing to accept the risks to any known or probable claims against a property.
  • However, they are not customary in all states. They are often used in Western states like Colorado, Wyoming, and Washington. In some circumstances, they are used in New York and Vermont. 

Normally in these situations, the bank or tax authority could be having information regarding the property ownership. As a result, guarantees are not so much of a concern during the property transfer.

How Bargain and Sale Deed Works

The execution or utilization of a bargain and sale deed will often be dependent on the provisions highlighted in the specific bargain and sale deed. For example, the grantor can choose to sell property in some cases while offering no warranties whatsoever against any existing or probable claims. This results in a bargain and sale deed without covenants.

Alternatively, the grantor/seller can decide to sell property while offering promises/covenants that they can guarantee against specific claims or defects to the property’s title. In such a case, a bargain and sale deed with covenants is used.

A bargain and sale deed is commonly utilized to transfer property between family members, into a trust or during foreclosure sales. In such cases, the deed is referred to as a bargain and sales deed in real estate.

In Oregon, parties can transfer their interest in one property to another through a bargain and sale deed without the usual procedural title deeds.

Bargain and Sale Deed vs. Quitclaim Deed

The primary difference between a bargain and sale deed and a quitclaim deed is that a bargain and sale deed implies the grantor owns the property title and has the legal right to transfer the same.

However, a quitclaim does not imply or infer that the grantor has ownership and conveyance authority of the property title; it transfers whatever interest the owner has in the property without specification.

Consequently, it is suitable for cases where the grantor does not have to guarantee the title or the title is unclear. Quitclaim deeds are typically used among property transfers that do not involve exchanging funds, such as among family members, partners, or friends.

As a result, a quitclaim deed can be used as a release deed in cases of inheritance. Due to the simplicity offered by quitclaim deeds, they can be used to incorporate name changes in a property title after the owner gets a name change.

In contrast, bargain and sale deeds are customarily used in foreclosures and tax sales. In such situations, the grantor cannot warranty against the property’s and title history as they do not occupy the land. 

However, both deeds do not offer the buyer (grantee) protection from claims against the property and its title.  Property titles conveyed with either deed are also challenging to insure.

Components of a Bargain and Sale Deed

What to include in a deed will, is in some cases, to be governed by state law requirements. However, a bargain and sale deed outlines the basics of a property transfer other than what state law stipulates.

These essential components include:

  • Identification details (name) of the grantor – party in possession of the title and intends to transfer it
  • Details of the grantee – the party to whom the property will be transferred.
  • The date of the transaction
  • The legal description of the property
  • The amount paid by the buyer/grantee for the transfer of property from the grantor to the grantee
  • A declaration that the said property is being transferred between the two parties
  • Signatures and the date of signing
  • Witnesses and notaries, depending on the state laws.

Common Types of Deeds

There are diverse types of deeds used for different property transactions. These deeds offer different guarantees associated with ownership and claims against the property.

With that in mind, other types of deeds include:

General warranty deed

With a general warranty deed, the grantor (seller) guarantees the grantee against any issues and financial liabilities linked to the property before and after the transaction. With a general warranty deed, the grantee is protected by any claim that arises in the future. Some states use a statutory warranty deed through which warranties applicable to property and its title are implied and not stated. These warranties are thus as stipulated by the state’s laws. 

Special warranty deed

On the other hand, a special warranty deed, also referred to as a limited warranty deed, guarantees the buyer against any claims against the property and its title linked to the period when the grantor owned the property – NOT before or after. This deed is commonly used to sell property acquired through a foreclosure.

Quitclaim deed

A quitclaim offers no guarantees whatsoever as it stipulates that the seller transfers any interest or rights, they have on the property without specifying the rights or interests. Basically, the grantor declares, “I am transferring this property to you, but I do not guarantee that I have any claims to this property.”

Common Defects in Bargain and Sale Deeds

A bargain and sales deed as it is (without covenants) only warranties against property ownership. Consequently, this leaves the grantee exposed to specific defects in the title and property.

Some of the common defects parties can decide to specify in a bargain and sale deed are:

Property taxes

Real estate property owners are liable to pay property taxes to cities, counties, or states. When the owner has unpaid taxes and intends to sell their property, this leads to a tax lien. This consequently becomes a defect in the title as the dues (tax, penalties, and interest accrued) must be cleared before the property can be transferred from one party to another. 

A tax lien can lead to a foreclosure, and a party can decide to assume the financial obligation through a bargain and sale deed if the lien is specified. It should be noted if there is a pending mortgage on the property, property taxes liens are prioritized over mortgage liens.

Income tax liens

Property owners with unsettled income taxes, the government can be termed as alien to the property. Therefore, income taxes and penalties dues must be paid before the property owner can convey ownership of the property to another party.

Judicial liens

If the property is part of any court proceedings, such as ownership disputes, the property then has judicial liens. However, unless specified in the bargain and sale deed, the seller’s legal obligation can be transferred to the buyer if the deed is used to conduct the transaction.

Note that state laws limit how long judicial liens can survive for property conveyed through a bargain and sale deed.

Mortgage liens

People use property to secure mortgages and loans from banks, lenders, and other financiers. Therefore, if the mortgage or loan is not cleared, the lender has a claim to the property (mortgage liens), and if the dues are unpaid, this can result in foreclosure. A mortgage that has been paid off has to first be confirmed by the seller of the property from the lender through a mortgage lien release.

This defect can be resolved through a bargain and sale deed in the case of the new buyer.

Mechanics/material liens

Mechanics of materials liens are often seen when selling or buying residential or commercial buildings. This defect arises when the previous owner paid for repairs, equipment replacement, and construction works and is yet to be compensated despite the property being up for sale.

A bargain and sale deed can transfer this financial obligation to the new owner resulting in a defect in the title.   

Local/municipal assessments and fees

If the property owner has pending fees for common infrastructure such as sidewalks and services such as garbage collection and sewer services, a lien is consequently allocated to the property. Unless the fees are paid, the lien can be transferred through a deed, and the grantee would then be financially obligated to the associated government or quasi-government.

Homeowners association dues

Any unresolved debts and fines owed to the homeowner association due to violations of rules, restrictions, and covenants are lien-able if filed with a court. If the grantor has such liens, they can be conveyed through bargain and sale deed and should be specified to reduce defects in the title.

Eminent domain

Eminent domain is the right of a government (local or national) over private property within its jurisdiction. This right is usually invoked to compel property owners to sell their property in preparation for a major construction project such as a railroad, stadium, or government offices.

Buyers should look into this defect as it might be costly where the buyer will be forced to sell the land to the government at a loss.

Free Templates

Following is a free downloadable template for you:

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    Conclusion

    Bargain and sale deeds are used to buy or sell the property without any guarantees that there aren’t any claims against the property or its title. Instead, it only verifies the grantor owns the property title. Typically, it contains the names of the grantor and the grantee, legal description of the property, date of transfer, purchase amount, statement of ownership transfer, and signatures.

    A bargain and sale deed is customarily used in foreclosure and tax sales. It can be made to offer specified warranties, unlike a quitclaim which offers no warranties. If it guarantees against specified claims and defects in the title, it is said to be a bargain and sale deed with covenants.

    The most common defects that should be considered when conveying property using a bargain and sale deed are unsettled property taxes, income taxes, mortgage, mechanics liens, judicial liens, municipal fees, homeowner’s association dues, and eminent domain.

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