Free Bargain and Sale Deed Templates

Typically, when property ownership is being transferred from one party to another, there should be a document that marks the transfer. The type of transfer document used depends on certain factors, with guarantee from the seller being one of the chief factors. When property ownership is transferred with no guarantee or warranty against encumbrances or liens from the seller (known as a grantor), a bargain and sale deed is used. Examples of such sales include foreclosure, court-ordered sales, tax sales, or sale of a deceased’s estate.

 In these cases, the grantor may not be aware of the property’s ownership history and can thus not guarantee the buyer (grantee) anything other than the title to the property. The grantee is thus expected to possess the property “AS-IS.” The grantee thus accepts all of the risks in the transaction. Bargain and sale deeds are predominantly used in New York, Colorado, Washington, Vermont, and Wyoming.

This article discusses how bargain and sale deed work, their components, and their limitations.

Bargain and Sale Deed

A bargain and sale deed is a popular form of real estate deed used in the U.S. for transferring property without guaranteeing any title (or ownership) against encumbrances or liens from the seller to the buyer.

It is a popular alternative to a warranty deed for transfers of the property where the title is uncertain. Consequently, the grantee will inherit all liens, encumbrances, and debts against the property and its title. Ordinarily, such deeds cannot be covered under title insurance. This is because, to a great extent, this deed resembles a quitclaim. It transfers property without guaranteeing that there are no liens or encumbrances (before the grantor’s ownership in this case). Without such warranties, title insurances refuse to cover such deeds. 

When to Use

A bargain and sale deed is ordinarily used when a grantor does not know what rights, liens, or encumbrances exist on a given property. As a result, the grantor does not want to prejudice the grantee with any promises about the title or offer any warranties. Therefore, these deeds are famous when a grantee purchases the property at a tax sale, estate sale, or foreclosure sale. In such cases, the bank or tax authority may know the property’s history but doesn’t want to compromise the transaction by disclosing this information to the buyer.

The grantor usually executes a bargain and sale deed. This deed usually contains the same information about the property as any other proper, recorded deed does. However, through this deed, the grantee assumes the title to the property “AS-IS.” Accordingly, the grantee will inherit all debts and encumbrances against the property. This may include liens on the property from a prior owner. This way, the grantor limits their liability.

Consequently, the grantee cannot sue the grantor should any claims arise. However, the grantor does warranty that they have the title to the property. The grantee may pay a relatively modest pro-ration of the property’s purchase price in return for assuming these pre-existing conditions.

Bargain and sale deeds can include certain warranties as follows:

Bargain and sale deed with covenant

In such a deed, the grantor may make “covenants” or warranties against certain aspects of the property. This way, the grantor retains liability for all potential claims explicitly covered by the covenant. The covenant can cover anything from liens to encumbrances. The covenant must be expressed, not implied.

Bargain and sale deed without covenant

In this case, the grantor does not include any express warranty against liens or encumbrances. As a result, the grantee is expected to assume all current and future liability regarding the ownership of the property. 

Bargain and sale deed in real estate

This ownership transfer deed transfers real estate ownership to a family member or a trust. It can also be used to buy-sell foreclosed real estate. 

Bargain and sale deed in Oregon

This is a statutory deed used to transfer property ownership in Oregon. It contains all the main components of a legally enforceable bargain and sale deed in Oregon.

Components of a Bargain and Sale Deed

A bargain and sale deed serves as a record of the transaction between the buyer and the seller and the change of ownership. A standard deed will contain the following components:

• The names of the seller/grantor and grantee/buyer must be filled in.
• A legal description of the property must also be on recorded.
• The deed must be dated. This should be the date of the transaction.
• Since a consideration will typically have to be exchanged from the buyer to the seller in exchange for ownership, the exact amount should be indicated.
• A statement that cites the conveyance of title/ownership should be included, for example, “Grantor transfers…” or “grantor bargains and sells….”
• Any expressed warranty (optional).

The following types of deeds are used in different circumstances. They differ from the bargain and sale deed in conveying ownership, guarantees, and limitations on liability.

The primary differences are as follows:

General warranty deed

Special warranty deed

Quitclaim deed

The bargain and sale deed is a simple and effective way to transfer property ownership. However, it does have some potential defects that the grantee may end up being transferred with the title and ownership of the property.

These include:

Property taxes

County and state governments can place tax liens on a property if there are unpaid property taxes. This is considered a defect in the ownership of the property. Note that if a tax lien is placed on the property, the lien and associated penalties and interest supersede any mortgages on the property. In addition, the first mortgage is prioritized over subsequent mortgages. It is common for the grantee to assume the payment of the property’s tax obligations such that the grantor is not held liable for those taxes.   

Judicial liens

This defect is placed on the property by order of the court. A judicial lien may be placed upon the property to secure a debt owed by the grantor, inheritance claims, title issues, or contested ownership. These liens can be conveyed to the grantee through a bargain and sale deed. This would obligate the grantee to pay off any judicial liens claimed after acquiring the property. However, these liens can expire based on the state time limits.

Homeowner association dues and restrictions

A homeowner association governs all or part of a neighbourhood and collects dues from property owners to pay for the cost of managing the common interest development/infrastructure. If any dues are recorded at the local courthouse, they may result in a lien placed on the property. This should be paid before the transaction is completed, as it may end in foreclosure. In addition, for real estate such as condos, owners must pay fees associated with common areas such as playgrounds. Failure to pay these imposed fees may result in a homeowners association lien, a defect associated with the bargain and sale deed.

Homeowners associations also regulate the use of specific amenities within their boundaries and consequently have rules and restrictions. Breach or violation of these rules often results in fines. If these fines are not settled, they can accumulate to justify a lien and eventually foreclosure. Therefore, if they are unpaid by the time of the transaction, they qualify as defects in the deed.

Mortgage liens

If the grantor secured a loan with the title or holds a mortgage on the property and they fail to pay off that mortgage by the time they are selling the property, the grantee may be held liable for any unpaid mortgages. Therefore, mortgage claims by banks and creditors are considered defects in a bargain and sale deed.

Material/mechanical liens

These are liens placed on the property due to contractual work such as repairs, renovation, landscaping, or any major work done on the property that was not fully paid off. Such liens and accrued interest can be transferred through a bargain and sale deed even though they do not compromise property ownership. 

Income tax liens

The government (IRS) can place a lien on a property to secure income tax debt. Therefore, if the property has to be sold, the government must recoup the owed tax, interest, and any imposed penalties.

Municipal fees and assessments

If the property is within a city/municipality, municipal fees will often be paid for government services such as sewerage services, road work, or other improvements to the street. The government or a quasi-government entity will bill homeowners to pay their due; if unpaid, a lien can be placed on the property. These liens can be passed on to an unsuspecting grantee who acquires the property without knowing such liens exist.

Eminent domain

Local governments may seize properties by eminent domain (public use) if they plan to build a road, highway, or other public works in the area. The government, however, pays a specific price for the demolition of the property. This can be inconvenient for a newly-bought property. In addition, because there is no right of redemption, property owners cannot fight this seizure. This is common for the property that is part of old plans and neighbourhoods.