When you’re looking to buy or sell property, you will encounter different types of deeds to facilitate the transfer of estate.
Bargain and sale deeds are often used when you’re looking for good real estate deals, such as:
- Tax sales
- Estate sales
- Foreclosed home properties
These kinds of deeds are most commonly used in the state of New York, among other US States.
This is because you get a foreclosed estate from banks, and the estate in question might have pending encumbrances like estate tax, mortgage, and the like.
Now, let’s try to understand what a bargain and sale deed is.
What is a Bargain and Sale Deed?
A bargain and sale deed is a document that grants rights of a title to the person who will purchase the estate.
The one who grants the title, or the seller, is called the grantor, while the one who receives the title, or the buyer, is called the grantee.
The difference between a bargain and sale deed with other deeds is…
A bargain and sale deed states the grantor has title to the property.
However, unlike other deeds, it does not assure the grantee there are no existing claims to the property.
In other words, it’s a document that says something like the following:
“I, the grantor, am the rightful owner of the property that I am conveying to you, the grantee. However, I do not guarantee that my property is free of claims.”
Thus, if there is any claim that exists, the claim is now the responsibility of the grantor, and not the previous one.
Types of Bargain and Sale Deeds
The explanation of bargain and sale deeds above is just the simplest form of the deed.
There are two main types of bargain and sale deeds that are important to discuss to further understand bargain and sale deeds.
Bargain and Sale Deed Without Covenants
A covenant is a provision, or promise, contained in a deed regarding the estate.
In simpler terms, an example of a covenant present in the deed would be a lien or encumbrance.
In the case of bargain and sale deeds, it pertains to any guarantees made by the grantor regarding any existing claim of the estate in question.
A bargain and sale deed without covenants is generally the simplest form of a bargain and sale deed.
These deeds are typically what was stated above and have no covenants contained in the deed.
Bargain and Sale Deed With Covenants
On the other hand, a bargain and sale deed with covenants is essentially a bargain and sale deed with additional guarantees regarding any claim on the estate.
All covenants contained in the deed must be specifically written, which means that it cannot be implied.
It is for this reason that I recommend that you have attorneys look at your deed if you are looking to buy property.
This is especially even more important if your deed contains any guarantees that you and the grantor have agreed upon.
This is to ensure consistency of what is in the deed versus what you and the grantor have talked about.
Knowing more about title defects, or title claims on the property you are about to buy may help you understand more about what kind of claim is usually included in your covenant.
Depending on where your house is, some states, cities, and counties tax your property.
If you continually fail to pay your property tax, then this might result in a tax lien on your property.
Liens are claims against assets used as collateral to be able to loan or take in debt. A lien is a way to compel the person who owns the estate to pay their debt.
If their debts or other payment obligations are not paid off, then the creditor may be able to seize your property due to the lien issued.
This could then lead to a tax sale, where your tax lien can then be sold to an investor who could then foreclose on the property.
If the previous owner has an UNPAID balance on any utility repairs, paint job, or equipment maintenance on your estate, then there may be underlying liens waiting for you.
It’s best to include these types of liens in your covenant.
So that you won’t have to be responsible in fulfilling the obligations from previous ownership.
Other Types of Deeds
Knowing the type of deed – even if it’s not bargain and sale deeds – is helpful to you, ESPECIALLY when buying properties from a grantor.
This will help you scrutinize your deed well so you won’t have to rely so much on your attorneys.
General Warranty Deed
General warranty deeds are the most common type of deed when property transfers are concerned.
The deed states the following:
- The grantor has ownership of the title
- There are absolutely no legal claims against the property
- The grantee has the right to hold the grantor accountable in the event any claim arises
General warranty deeds are the most secure deed in terms of liabilities and obligations with regards to the land.
Conveyance of the title is secured and as a grantee, the general warranty deed is the most desirable type of deed you want to get.
Special Warranty Deed
Unlike your General Warranty deed, a special warranty deed (or limited warranty deed) covers only claims incurred or recognized WHILE the grantor has a title.
Any claims incurred BEFORE the grantor claimed ownership for the property are not covered by this deed.
A special warranty deed is often used when the grantor sells property acquired through foreclosure and is quite similar to a bargain and sale deed with a covenant.
However, a special warranty deed is often better than your bargain and sale deed since the latter only covers any specified claim, unlike the former.
In a quitclaim deed, the grantor grants no warranties of any kind with this kind of deed.
Essentially, what a quitclaim deed says is, “I transfer all of my rights in this title to you, but I can’t assure you that I have any right to this property.”
Sounds like a scam right?
It’s even worse than a bargain and sale deed without a covenant since you can’t even assure the other person that you own the property.
However, a quitclaim deed is commonly used to transfer property either quickly, or in the least hassle manner possible.
An example of this is a transfer of property between family members, or into or out of a trust, or to correct a problem with the document itself such as the incorrect spelling of a name.
Since you are dealing with people from home whom you trust. Warranties are often not needed.
How Do I Protect Myself from Property Transaction Scams?
Of course, no one would like to squander away hard-earned money just to get ownership rights to a property with lots of claims and liens under state law with no warranties.
So here are some tips to avoid the effect of scams and loopholes in the law.
A search is an examination of public records to confirm whether the title of a property is clean.
The search reveals legal ownership of a real property and finds out all claims or liens present on the property.
It is usually performed by an attorney for the prospective buyer who may be interested in the real property.
Hiring an Attorney
An attorney will be looking out for your best interest.
In fact, your attorney will look at articles upon articles of your contracts and documents.
Go to the property site, negotiating additional warranties, and just basically looking out for your rights and best interest.
If all else fails, a title insurance protects property owners from any losses that you will incur for any unforeseen defects that a property may have.
In a way, a title insurance serves as backup warranties for any claim against your home that you may have not foreseen.
When looking for real estate, it seems as if you have a menu of options when looking at properties.
This is especially true when looking at lots of good deals from foreclosed properties. For this type of property, you will most often encounter bargain and sale deeds.
Hopefully, with this article, you now have an overview of how the transfer of property works, specifically the bargain and sale deed.