How Bargain and Sale Deeds Work in Real Estate

A bargain and sale deed is a legal document that facilitates the transfer of real property from the previous owner (the grantor) to the new owner (the grantee). This type of deed is often used in real estate foreclosures and tax sales, while standard home sales typically involve [warranty deeds](https://www.masterclass.com/articles/what-is-a-warranty-deed). Commercial lenders prefer warranty deeds because they guarantee that a property will be free from encumbrances such as title defects, tax liens from a prior owner, or unknown easements from other properties. Bargain and sale deeds do not offer these guarantees. A bargain and sale deed form contains several key pieces of information. - __Legal description of the property__: This description may include the property's mailing address and tax assessor's parcel number. - __Names of grantor and grantee__: The grantor has current ownership of the property. The grantee is the new owner who is taking the title on the property. - __Affirmation of a legal right to sell__: A bargain and sale deed affirms that the grantor has the right to deed, or transfer, the property to a new owner. - __No title protections__: A bargain and sale deed makes no guarantees that the property is free from title problems or other encumbrances. Homeowners who purchase a foreclosed home with a bargain and sale deed may encounter tax liens, problematic easements, or third-party claims to the title. To minimize risks that come with a bargain and sale deed, some buyers perform a title search, purchase title insurance, and contract a real estate attorney before purchasing a foreclosed home. Quitclaim deeds—sometimes called quick claim deeds—are rarely used to transfer the title in a commercial real estate sale. More commonly, they are used to transfer interest in a property when no monetary consideration changes hands. Examples include transferring real property between family members or to a living trust (often as part of estate planning), correcting errors and title defects from a previous transaction, or adding or subtracting a person from an ownership group. Quitclaim deeds rarely accompany commercial real estate sales because they do not prove that a grantor has the legal right to deed a piece of property. In some cases, grantors deed property that both sides know the grantor does not own (often to clear up title errors), which is why a quitclaim deed would not be used in a foreclosure sale. A bargain and sale deed is more appropriate since it affirms a legal right to sell. Property owners typically deal with six different types of deeds depending on their relationship with the buyer or grantee. 1. __Quitclaim deed__: A quitclaim deed transfers property from one owner to another but it does not warrant a clear title, and it does not prove that the grantor has the right to deed (transfer) the property. Quitclaim deeds are typically used to clear up title errors, transfer property between family members or to a living trust, or add or subtract people from an ownership group. 2. __General warranty deed__: A general warranty deed accompanies a commercial sale of real property. It is effectively an affidavit confirming that a grantor has the legal right to deed the property to the grantee, and it provides assurance of the title for the entire history of a property. It guarantees that the buyer will encounter no claims, tax liens, or other encumbrances from any period in the property's ownership. 3. __Grant deed__: Also known as a special warranty deed or limited warranty deed, a grant deed functions like a general warranty deed with one notable exception: It only guarantees a clear title and a lack of encumbrances for the time the seller owned the property. This type of deed provides less protection to a buyer than a general warranty deed, which promises a clear title for the property's entire ownership history. While a grant deed does not protect the buyer against claims from a previous period of ownership, it does protect the seller from being held liable for these claims. 4. __Bargain and sale deed__: A bargain and sale deed affirms that a grantor has the right to deed the title on the property for sale. It does not, however, assure that the grantee will receive their property free from encumbrances. 5. __Deed of trust__: A deed of trust is a legal document that accompanies some home loans. It serves as an agreement between three parties—a beneficiary (the lender), the grantor (the borrower), and a trustee (a neutral third party such as a title company). It places a lien on a piece of property that expires when the borrower has fully paid back the loan. 6. __Mortgage deed__: A mortgage deed functions like a deed of trust with one key difference. This type of deed features only two parties—a lender and a borrower. The trustee, who holds the title in a deed of trust, does not factor into a mortgage deed. Title in the property is split evenly between the lender and the borrower until the mortgage is paid in full. At that point, the title goes exclusively to the homeowner, who no longer owes any debt. All investments, including real estate investments, come with inherent risks which may involve the depreciation of assets, financial losses, or legal ramifications. The information presented in this article is for educational, informational, and referential purposes only. Consult a licensed real estate or financial professional before making any legal or financial commitments. All you need is a [MasterClass Annual Membership](https://www.masterclass.com) and our exclusive video lessons from prolific entrepreneur Robert Reffkin, the founder and CEO of the real estate technology company Compass. With Robert’s help, you’ll learn all about the intricacies of buying a home, from securing a mortgage to hiring an agent to tips for putting your own place on the market. Bargain and sale deeds are often used to transfer property rights in the case of foreclosure.