In the deed, the seller's consideration is clear (the property). To avoid any questions later, it is typical for the deed to include a recital that confirms that the buyer also provided consideration. That recital is usually the typical, “One dollar and other good and valuable consideration.”
Most homeowners want to get as much money as they can for their home values. However, there are specific cases when homeowners will transfer their properties for only a dollar. This most notably occurs when parents are selling properties to their kids or one partner is exchanging ownership to another.
The one dollar is considered nominal consideration and therefore inadequate. The one dollar is essentially pretend consideration which courts see through. On the other hand, bad negotiation will not generally result in a contract being deemed unenforceable.
It is important to note that the law does not specify how much consideration must be given. As a result, it's become a common practice to state a nominal consideration, such as $10, in the deed, regardless of the actual property value or purchase price.
The ten dollars is the "peppercorn" that provides concrete consideration and ensures that the contract is valid, while the actual amount paid for the house is hidden and referred to only as the "other good and valuable consideration."
This phrase in many contracts is meant to ensure that the legal requirement of consideration having been paid for a promise to be legally enforceable has been met. The token amount of $1.00 will be sufficient consideration for the promises made by Y, no matter how valuable those promises may be.
If money is changing hands—such as when real estate is being sold—deeds will usually list a nominal amount of consideration (e.g., $10.00) or list the actual purchase price of the property. And some states, including Alabama and Michigan, require that the consideration be clearly stated.
When you own a home, the deed is the physical document that proves ownership. The title is the concept of legal ownership that the deed grants you. You can think of the deed as the document that transfers, or passes on, the title or the right to ownership. When you buy a home, you need both.
Recording the deed gives the public notice that the grantee now legally owns the property. Not recording a deed can cause problems for the grantee. They may be unable to obtain a mortgage, insure the property, or sell it.
If your names appear on the deed, you own the property if one of you dies. You are not liable for the mortgage loan if you do not have a mortgage. However, if your spouse dies, you inherit their interest in the property. The mortgage lender can evict you if you default on mortgage payments.
$1 is an inadequate consideration, but courts cannot enforce it. In a contract, consideration is what a person is entitled to after fulfilling a contractual obligation. A consideration is vital for a promise (a contract or an agreement) to be enforced by the courts. Consideration must meet specific characteristics.
However, if it were your birthday and your friend wrote down "I give you my car in consideration of one dollar," this same consideration would not seem adequate. Thus whether $1.00 is consideration does not depend on the benefit received but whether the $1.00 had actually been bargained for.
Sham/Nominal Consideration: reciting false consideration to bind a gratuitous price or consideration that is clearly lacking in value in comparison to the promise. Strictly rejected by the restatement, but some courts will treat it as a clear intention of the parties to make the contract binding.
In the eyes of the IRS, if you transfer money or property to another person for nothing (or less than full value) in return, then it's considered a gift and the value of that gift must be reported using a gift tax return (IRS Form 709). This doesn't necessarily mean you owe any taxes on that gift, however.
You may have found that, while perusing home listings, some have been listed for just a dollar. Why are some properties listed for so little? Simply put, a home is listed at just a dollar to try and entice more interest from prospective buyers.
You can sell property to anyone you like at any price if you own it. But do you really want to? The Internal Revenue Service (IRS) takes the position that you're making a $199,999 gift if you sell for $1 and the home's fair market value is $200,000, even if you sell to your child.
The term “quiet title” generally refers to any lawsuit that attempts to confirm ownership, fix a title error, or settle an ownership dispute. The end result of a quiet title lawsuit is a court order clarifying or confirming who owns the subject property. In other words, a quiet title fixes the chain of title.
The answer is a deed. Proof of ownership is evidence that title is marketable. A deed by itself is not considered sufficient evidence of ownership. Even though a warranty deed conveys the grantor's interest, it contains no proof of the condition of the grantor's title at the time of the conveyance.
A deed and title similarly refer to the ownership of a property, but there are key differences to be aware of as you venture into the home-buying (or selling) process. Remember that while a title refers to your ownership of a property, a deed is the physical document used to prove and transfer that ownership.
Surprisingly, most have very little monetary value in the market unless they are signed by important people, are particularly early, or can shed some light on an interesting household. Still, any old deed should be properly evaluated as some can fetch substantial sums.
General warranty deeds give the grantee the most protection, special warranty deeds give the grantee more limited protection, and a quitclaim deed gives the grantee the least protection under the law.
Consideration Amount:
The deed must specify the exact amount of money exchanged for the property. This is typically the purchase price.
A deed is not a contract between seller and buyer to sell real property, but rather, it is the fulfillment of the transferor's intent to transfer the property. Since a deed is not a contract, deeds in various states do not require a deed to show a consideration amount.
A warranty deed is a legal real estate document that protects the buyer and ensures that the seller holds a clear title to the property, has no outstanding liens or mortgages, and there will be no future claim to the title of the property.