Are you thinking of buying a second hand car? Buying second hand is cheaper, better for the environment, and grants cheaper insurance costs. But if you’ve already started looking, you may have come across offers that repeatedly say the phrase “open deed of sale.” What is an open deed of sale, and why are so many people warning you against it? Here’s what you need to know.
What is an open deed of sale?
Before we can learn what an open deed of sale is, we must first know what a deed of sale is in the first place. You can think of a deed of sale as a receipt – it is a legal document proving that the purchase of a property between buyer and seller is complete.
A deed of sale contains the information of both the seller and buyer, such as their full name, marital status, and address. If the property in question is a motor vehicle, then it should also contain details such as its make, model, color, body type, plate number, engine number, and selling price. Finally, both the buyer and seller must sign the document and have it notarized by a lawyer.
This document becomes an open deed of sale if it lacks the buyer’s information and signature. This type of deed of sale is common among those in the motor vehicle buy and sell industry. Many of these resellers don’t want to deal with the hassle of registering the vehicle to their name if they’re going to sell it soon regardless, so they leave the deed of sale open to save time and effort.
Why shouldn’t I buy or sell a vehicle with an open deed of sale?
There is heavy risk that comes with buying or selling a vehicle with an open deed of sale. For one, these deeds are not legal. An open deed of sale does not comply with the requirements of the Land Transportation Office for transferring car ownership. It also cannot be notarized, and any lawyer who attempts to notarize an open deed of sale may face civil and criminal liability.
There are also personal risks that both buyers and sellers will be subject to with the transaction. Buyers would have no way of knowing the vehicle’s history, such as whether it has had multiple changes of ownership before. In the worst case scenario, the buyer would not know if the vehicle has an unsavory history; it may actually be a stolen vehicle that is currently being searched for, or a vehicle that was involved in a major accident. The PNP has no way of knowing whether the current driver is part of the vehicle’s history or not. However, the fact that he or she is currently using that vehicle may be enough grounds to arrest him or her without explanation.
Sellers are also putting themselves in a risky position. After all, their name is still on the deed of sale, which means they will be held liable for any major incidents that the vehicle may get into. They would also have to pay for any fines and penalties levied against them for any rule violations committed by the new owner of the vehicle. The seller could even face criminal charges if the vehicle becomes involved in an incident that gets someone injured or killed.
When should I agree to an Open Deed of Sale?
Despite all the risks, many people still buy or sell vehicles with an open deed of sale. Sellers may still prioritize the convenience of keeping deeds open, while buyers may find vehicles with open deeds of sale at low prices. It’s tempting to wave off the risks and take the plunge regardless.
If you’re in need of a vehicle, finding one in the market with a completed and notarized deed of sale is still the best course of action. However, if you’re willing to take the risk, it’s best to only agree to a transaction with an open deed of sale if:
- You are able to close the deed of sale right away. If you’re going to purchase a vehicle with an open deed of sale and you don’t plan on reselling it, it’s best to close the deed of sale as soon as possible to avoid any of the risks. Thankfully, the process is simple; all you have to do is fill out the buyer’s information, affix your signature, and have it notarized by an attorney.
You know the seller personally. One of the only times it’s safe to agree to a transaction with an open deed of sale is when you’re dealing with someone you already trust. If you know the seller personally, then you most likely know that he or she isn’t in any shady deals. You can also make sure that the vehicle is in good condition before buying it.