The consideration clause in a deed is the sentence that states what the grantee gave the grantor in exchange for the property. It might name a specific dollar amount, describe non-cash value like a property swap or assumed mortgage, recite a token sum such as $10, or rest on “love and affection” in a family transfer. What you put in that clause affects your transfer tax bill, whether you qualify as a bona fide purchaser, whether the IRS treats the deal as a gift, and what the recipient’s cost basis will be when they sell.
What the Clause Says and Where to Find It
The consideration clause sits near the top of the deed, right after the names of the grantor and grantee, woven into the granting sentence that actually transfers ownership. A typical version reads: “for and in consideration of the sum of [amount], the receipt and sufficiency of which is hereby acknowledged, the grantor does hereby grant, bargain, and sell unto the grantee…” The “receipt and sufficiency” language confirms the seller has already received the value and cannot later argue the deal lacked an exchange.
If you are reviewing a deed at closing or drafting one, look for the dollar figure and that acknowledgment sentence immediately before the legal description of the property. Wording varies by jurisdiction, but the pattern is consistent enough that most deed forms follow it almost identically.
The Three Kinds of Consideration
Valuable consideration is anything with measurable economic worth: cash, a mortgage the buyer takes on, another piece of real estate, forgiveness of a debt, or professional services. This is what appears in ordinary market sales at a negotiated price.
Good consideration is based on family relationship, love, or affection rather than money. A parent deeding a home to an adult child often recites good consideration. It is legally recognized as support for a transfer, but it carries tax and title-protection consequences that valuable consideration does not.
Nominal consideration is a token amount, commonly $1 or $10, listed to acknowledge that some exchange occurred without revealing the real price. Parties use it for privacy or in deals where the actual value is complex to state, such as transfers involving debt assumptions or exchanges of multiple properties.
Does a Deed Even Need Consideration?
A deed is not a contract, and the rules are different. A sale contract needs mutual consideration to be enforceable. A deed can transfer property as a gift with no valuable consideration at all. Gift deeds reciting only “love and affection” successfully move title every day in every state.
Reciting consideration still serves practical purposes. It creates a written record of the exchange, satisfies the expectations of title companies and county recorders, and triggers legal protections for the grantee. A deed with no recital of consideration is more likely to face scrutiny during a title search or a future dispute over whether the grantor truly intended to part with the property.
Why Nominal or Zero Consideration Can Backfire
You May Lose Bona Fide Purchaser Protection
Recording statutes in every state protect a “bona fide purchaser for value” from prior unrecorded claims on the property. To qualify, you need to have paid real value and taken the deed without knowledge of competing interests. A deed reciting only $10 or “love and affection” generally does not meet that standard. Someone holding an older, unrecorded deed or lien could potentially assert their claim against you, even though your deed was recorded first.
In a full-price purchase, nominal consideration on the deed face combined with a separate transfer-tax affidavit reflecting the true price may still support bona fide purchaser status. The risk rises any time the recorded deed itself does not reflect actual value paid.
Creditors Can Unwind the Transfer
When a property owner transfers real estate for far less than it is worth, creditors can challenge the transfer as fraudulent. Under federal bankruptcy law, a trustee can undo any transfer made within two years before a bankruptcy filing if the debtor received less than “reasonably equivalent value” and was insolvent at the time or became insolvent because of the transfer.1Office of the Law Revision Counsel. 11 USC 548 – Fraudulent Transfers and Obligations Most states have adopted similar rules under voidable-transaction statutes, often with longer look-back periods.
If you receive property from someone with significant debts or pending lawsuits, a $10 consideration clause is a red flag. Paying fair market value and documenting it in the deed is the strongest defense.
How the Consideration Amount Drives Transfer Taxes
State and local governments use consideration to calculate transfer taxes, sometimes called documentary stamps or deed excise taxes. Most states impose some form of transfer tax, typically a percentage of the sale price or the consideration stated in the deed. Rates range from a fraction of a percent to over 2% of the property’s value in some areas. A handful of states impose no transfer tax at all.
When the deed recites only nominal consideration, tax authorities do not simply accept the $10. Assessors look to the actual sale price, the fair market value, or the amount of any debt assumed by the buyer to determine the correct tax. Many jurisdictions require a separate transfer-tax affidavit or declaration of value that discloses the real price. Understating consideration to reduce transfer taxes can result in penalties, additional assessments, or a lien against the property.
Federal Gift Tax When Consideration Is Below Market
Transfer property for less than its fair market value and the IRS treats the difference as a gift. If a home is worth $400,000 and the deed recites $10, the federal gift amount is $399,990.2Office of the Law Revision Counsel. 26 USC 2512 – Valuation of Gifts The rule applies to any below-market sale, not just outright gifts.
For 2026, each person can give up to $19,000 per recipient per year without triggering a gift tax return.3Internal Revenue Service. Revenue Procedure 2025-32 Real estate transfers almost always exceed that threshold, so the grantor must file IRS Form 709 to report the gift.4Internal Revenue Service. Instructions for Form 709 Filing does not necessarily mean tax is owed right away. The excess applies against a lifetime exemption that currently shelters millions of dollars in cumulative gifts. Skipping the filing altogether is a compliance problem, and it prevents the statute of limitations from starting on that gift.
The Cost Basis Trap for the Recipient
The consideration amount also shapes the recipient’s tax bill when they eventually sell. Buy a home at full market value and your cost basis equals what you paid; you owe capital gains tax only on appreciation above that basis.
Gift transfers work differently. The recipient inherits the donor’s original cost basis rather than a new basis equal to current value. If your parents bought a house for $80,000, it is now worth $400,000, and they deed it to you for $10, your basis is $80,000. Sell the next day for $400,000 and you face capital gains on $320,000. Families are routinely blindsided by this. The one exception involves losses: if the donor’s basis exceeds the property’s fair market value at the time of the gift, the recipient uses the lower fair market value as the basis for calculating any loss.5Office of the Law Revision Counsel. 26 USC 1015 – Basis of Property Acquired by Gifts and Transfers in Trust
This carryover-basis rule is the main reason to weigh transferring property during life against passing it through an estate. Inherited property generally receives a stepped-up basis equal to its fair market value at the date of death, which can eliminate decades of built-in gains.
Privacy and the Public Record
A recorded deed becomes part of the permanent public record, and anyone can look up whatever consideration figure appears on its face. This is one reason buyers and sellers choose nominal consideration on the deed itself, particularly in private sales or family transfers where they prefer not to broadcast the price.
About a dozen states are “non-disclosure” jurisdictions, meaning the actual sale price is not part of the public record at all. In disclosure states, the actual price is typically reported through a separate filing, such as an affidavit of value or a transfer-tax return, that goes to the tax assessor. Some of those filings are publicly accessible; others are confidential. Practices vary enough by state that it is worth checking your local recording office before assuming either full privacy or full disclosure.