A deed is a legal document used to transfer ownership rights of a home or other piece of property, from the current owner to a new one. There are many different types of deeds, each of which has its own requirements. However, the majority of deeds generally contain the following information:
- A description which clearly identifies the property that is being transferred;
- The names of all parties who are taking part in the deed transaction, generally the grantor and the grantee; and
- The signature of the party who is transferring the deed. It is important to note that this signature must be notarized by a notary public.
The most common examples of when a deed may be used is to transfer ownership:
- During the purchase or sale of a home;
- When a person inherits property from one of their family members; and/or
- To transfer gifts, trust contents, and specific rights, such as a sheriff’s deed or a tax deed.
If you receive a property deed, it is imperative that you record it with the local county recorder’s department in the county in which the property is located. Although recording a deed is not actually required by law, failing to record your deed can lead to serious consequences. An example of this would be not being able to properly assert your ownership rights, as there would be little proof that you are indeed the property owner.
As previously mentioned, there are a considerable number of different types of deeds of transfer. Some of the most common ones include:
- Quitclaim Deeds: Quitclaim deeds provide the least amount of protection for the buyer. While quitclaim deeds do transfer the property in question, they do not guarantee that the grantor has actual ownership or rights to the property. Additionally, they leave the buyer open to potential legal issues. An example of this would be if there is a lien against the property, or if someone else is the true owner and tries to claim the property as their own;
- General Warranty Deeds: In comparison, general warranty deeds provide the buyer with the greatest amount of protection. A general warranty deed guarantees that the grantor actually owns and can sell the property. Additionally, this type of deed promises that the property does not have any debts, encumbrances, or liens against it; and
- Special Warranty Deeds: Special warrant deeds give the buyer adequate protection for two specific guarantees. The first guarantee states that the grantor does in fact hold title to the property. Second, it is guaranteed that no liens or encumbrances existed on the property while the grantor owned it. However, special warranty deeds say nothing about what encumbrances may be associated with the property before they owned it.
What Is A Bond For Deed?
A bond for deed is a specific type of contract for the sale of real property. In a bond for deed arrangement, the purchase price is paid by the buyer in set installments, as opposed to paying the entire purchase price for the property at closing. It is a form of owner financing with the exception that the seller retains the deed, as well as legal title to the house, while transferring physical possession of the house to the buyer.
During the period in which the buyer makes their payments to the seller, the seller retains full legal rights to the home. However, the buyer is allowed to make repairs and improvements to the home, as well as live in it.
If the buyer defaults on their payments, the entire property goes back to the seller. Additionally, in some states, the buyer will be out for all of the improvements they have made to the property. One such state would be Louisiana.
Once the buyer has completed their payments as agreed upon, the seller will deliver the deed to the buyer. Under some circumstances, the buyer’s name can be placed on the title well before they are done making their payments.
Many property sales arrangements involve a bond for deed, due to the fact that most buyers do not have the funds to cover the entire purchase price. A bond for deed may also be referred to as a land contract, or alternatively, a contract for deed. Bonds for deeds frequently involve a mortgage agreement, while in some cases, the seller may finance the buyer themselves as previously mentioned.
Traditional owner financing mirrors a bond for deed. However, it is common in a bond for deed arrangement for the deed and title to be placed in third-party escrow. This is done in order to protect both parties’ interests. Payments are still made directly to the seller, and should the buyer default, the seller can invoke legal proceedings in order to get the property back. Most states have determined that the buyer can then countersue, and claim reimbursement for all home restorations and improvements. This is on the condition that these improvements enhance the value of the house and are therefore justified.
What Are Some Of The Advantages Associated With A Bond For Deed? What Are Some Of The Disadvantages?
To reiterate, a deed for bond is generally reasonable, as the average person would usually prefer to pay in installments over time as opposed to one lump sum. Additionally, a bond for deed allows the seller and purchaser to specify different terms of the payment process, as needed for their specific circumstances.
Some examples of such terms include, but may not be limited to:
- Overall total purchase price;
- Interest rates;
- Methods of payments; and
- Legal remedies in the event of a breach of contract.
Additionally, any provisions associated with insurance and tax rates can be tailored according to the needs of the seller and buyer when negotiating. Because of the various terms that will need to be agreed upon, the involvement of a lawyer is generally necessary during the negotiation and drafting stages.
Generally speaking, a bond for deed arrangement allows the buyer and seller to come to an arrangement much more quickly. This is because the arrangement does not require the same legal filings in most states, and can be executed within hours or days, depending on how quickly the two parties can agree with each.
However, this shortened nature of the agreement exposes the buyer to considerably more risk, as default would result in repossession without reimbursement. While traditional owner-financing options can take longer, the contract can be better developed in order to provide better protection to the buyer, as opposed to just the seller.
What Are Some Common Legal Issues Associated With A Bond For Deed?
Bonds for deed transactions can be associated with specific types of legal disputes. As with any contract, the agreement can be subject to various violations and disputes, including:
- Failure of the seller to transfer the deed after the buyer’s payments have been completed;
- Failure of the buyer to make payments, as previously discussed, in which case the buyer may forfeit their right to the deed; and
- Violations of warranty obligations associated with the deed. An example of this would be the guarantee that the seller is the legal owner of the property.
Many legal disputes involving a bond for deed arise because the contract agreement was unclear, used vague language, or was poorly written. An example of this would be if the parties attempt to complete the paperwork by themselves, without the guidance of an attorney. A clearly written bond agreement is imperative to preventing various future legal disputes and lawsuits.
Do I Need An Attorney For Assistance With Bond For Deed?
If you are considering entering into a bond for deed arrangement, or are experiencing issues associated with your bond for deed arrangement, you will need to contact an experienced and local real estate attorney.
A local lawyer will be best suited to helping you understand your rights and legal options according to the real estate laws of your specific state, and will also be able to represent you in court, as needed.