As a closing attorney I get asked this question all the time. So, let's clear up this mystery.
To start with, here is the magic language (or very similar to how it is in your area): "That for and in consideration of ten dollars ($10.00), cash in hand paid, and other good and valuable considerations, the receipt and sufficiency of which are hereby acknowledged, the Grantor has bargained and sold, and does hereby bargain, sell, convey, and confirm unto the Grantee the following described real estate."
Does this sound familiar? Anyone who has ever bought or sold a home may have seen this (or similar) language written on the deed and questioned why it is there.
To start, let's address the fact that in a real estate transaction there are two different things taking place to complete the sale. There is the Purchase and Sale Agreement, which is the contract by which two parties agree to the purchase/sale of a piece of land or property, and also the Deed (usually a Warranty Deed) which is the actual sale document. The Purchase and Sale Agreement outlines the agreement between the Buyer and Seller, but it does not have the authority to transfer ownership of the property, that is where the Deed comes into play.
In order for any contract to be deemed valid, some consideration, or something of value, must be exchanged. There are three legal requirements that must be met in order to prove consideration. First, both parties must make a promise, perform an act, or forbear, refrain from doing something. The second requirement is that each party's promise, act, or forbearance must be in exchange for a return promise, act, or forbearance. Finally, the thing that each party exchanges must have legal value, or have value in the eyes of the law (meaning a value can be assigned to it, if needed).
The consideration given for a Purchase and Sale Agreement from the Buyer is the earnest money, the consideration from the Seller is the promise to sell the home. Not only does this provide a Legal Value by which a court can determine the value of the Agreement, but it also acts as good faith on the part of the Buyer showing they are willing to potentially part with that money should the contract not be consummated as anticipated.
The consideration given to induce the Seller to sign the Warranty Deed is the agreed upon sales price of the property. Once a deed is signed by the Sellers it is then recorded with the local County Court, or Clerk, or in our case, Register of Deeds Office. The recorded Deed is public knowledge, so by using the language of "Ten Dollars, and other good and valuable considerations" we effectively can limit the knowledge of prying eyes as to how much you just bought or sold a house for. In this case the "Good and valuable considerations" are the rest of the purchase price, if you want to break it down precisely.
So, no, you didn't just buy or sell a home for $10.00, but you did buy or sell for $10.00 and other good and valuable consideration!
If you feel that this information may help you or a client, please reach out. It is my mission to help others.
Jeremiah L. McGuire
Attorney
Memphis, TN
901-494-1622
jeremiah@harkavyshainberg.com