Recording Your Property Deed/Title
Most people are aware of the fact that when you purchase a home that you’ll record the deed with the County Recorder. This basically serves to notify any interested party that a property has changed ownership. This is especially important when you go to sell your property at a later date.
Imagine the amount of fraud that could occur if nobody ever confirmed who owns what property. Unfortunately, real estate is far from immune from fraud, such as when someone tries to sell or rent property that they don’t own.
Deed vs Title
Just a quick technical point. A title is the legal right to possess real estate, while a deed is a legal instrument that conveys or transfers the title from one party to another. While you’re allowed to record anything you like, when real estate changes hands it’s typically the deed that gets recorded with the county.
Recording is Optional, but Wise
Although it may be standard practice in many places to record a deed, and while it’s certainly good practice, interestingly enough, it’s not a legal requirement for a deed to be valid. In other words, the legal transfer of property can still take place without a deed being recorded. But when a deed isn’t recorded, it sets things up for issues down the line.
With over 3100 recording systems in the United States, the requirements and rules can get quite complicated. Still, there are a lot of similarities. Below we’ll cover three types of recording statutes, which have to do with determining who has legal precedence, or basically if two people claim to own the same property, who the court system would rule to be the legal owner.
Consider the following problem. A woman named Angela purchases a house and two weeks later records the deed with the County Recorder proving that she bought the house. But in the meantime, between the time that Angela bought the house and the date that she recorded the deed, the person who sold her the house, turns around and sells it again, this time to someone else. Let’s call this second buyer Roberto.
Wanting to be fair to both parties, we might make the case that Angela bought the house first and so she should be the rightful owner, while Roberto was merely an unfortunate victim. But, how was Roberto to know that Angela already bought the house? First, Angela isn’t necessarily required to record the deed and even if she was, when Roberto bought the house, Angela had yet to do so. Not surprisingly, different states have different rules for handling such a situation.
The first type of statute or law is known as a race statute. In this case, there is a “race” to see who records their deed first. It doesn’t matter who bought the property first, or even if the second buyer knows that the property was already sold to someone else. The only thing that matters is who records the deed first. The first person to record their deed is the legal owner.
The second type of statute is similar to the race statute, in that there is a “race” to see who records their deed first. Again, it doesn’t matter who bought the property first, only who records the deed first. However, with race-notice statutes there is an additional requirement. In order to be labeled the rightful owner of the property, a person must also be a bona fide purchaser. This means that they must provide consideration for the property (i.e., pay something of value for it), buy the property in good faith (e.g., without intending to commit fraud), and have no notice of an earlier sale.
Think back to our example. In this case, if Roberto presumably paid for the house and acted in good faith. However, if he knew that Angela had bought the house before him, then the fact that he recorded his deed first wouldn’t matter.
The last type of statute awards the property to any bona fide purchaser. As long as the person pays for the property, acts honestly, and has no notice of a prior sale they’ll be deemed the new owner.
Let’s say that Angela bought a house from Jordan, who recorded the deed years earlier. Although Angela never records her own deed, she would be the rightful owner of the property, at least for the time being. Down the road Jordan decides to sell the house “again”, this time to Roberto. Roberto is an honest buyer and when he checks the County records, finds no evidence of Angela owning the property. As far as the records show, Jordan is the last known owner and so Roberto goes ahead with the purchase (perhaps thinking that Angela is a squatter). At this point, Roberto would become the rightful owner of the property.
The takeaway from this article is that regardless of what system your state uses, it’s in your best interest to record a deed when you purchase a property and to do so as quickly as possible. You’re most at risk during that period of time between when you buy a property and when you record the deed, so limiting that time frame as much as possible is a good idea.
Additionally, if you’re especially concerned about fraudulent activity, you may consider recording documents aside from the deed that would serve to notify others of your interest in a property. For example, you could record the sales contract (which precedes the deed). However, most people don’t do this for privacy reasons, such as not wanting others to know how much they paid.
As with all legally oriented articles, this one is not intended to serve as legal advice. The information provided here is strictly for entertainment purposes. The author is not an attorney and you are encouraged to consult your own legal counsel before acting on anything you may have read in this article.