Recording-2025-03-10T12:42:24.182Z

Improper Recording Example

• Definition: Improper recording occurs when a property transfer is not officially documented in the public records, leading to legal complications.

• Scenario:

  • I sold my house to Ricardo for cash.

  • The sale was never recorded at the courthouse.

  • Ricardo tries to sell the house to Summer, causing confusion about ownership.

  • Since my sale to Ricardo wasn't recorded, it appears that I still own the house, which creates a title defect.

Title Defects

• Common Issues:

  • Cloud on Title: A title issue that prevents the transfer from one owner to another.

  • Unreleased Liens/Encumbrances: Outstanding debts that may affect the property's title.

  • Discrepancy in the Chain: Issues arising from improper documentation or recording of previous property transfers.

• Legal Action: Owners may file a quiet title action to clear the title defects.

Resolution for Title Defects

• Payment for Recordation:

  • If Ricardo wants to sell the house now, he must pay to record a lien release to clear any existing issues with the title.

• Quiet Title Action: Can be instituted to resolve disputes over the title and confirm legal ownership.

Title Insurance

• Purpose: A one-time insurance fee paid during the home purchase to protect against title defects.

• Example Scenario:

  • If Ricardo forged my signature to sell the house to someone else, title insurance would cover any potential claims I may present against the new buyer.

• Coverage: Title insurance protects buyers from claims related to prior ownership, unknown liens, or illegal transfers.

• Required by Lenders: While not mandatory for all transactions, many lenders require title insurance for protection.

Escrow Accounts

• Definition: An account maintained by a lender that holds funds for future payments like property taxes and homeowners insurance.

• Functionality:

  • Monthly mortgage payments will include contributions to the escrow account.

  • Tax payments are dispersed by the lender rather than the homeowner making direct payments.

Closing Process

• Settling Title:

  • The title company acts as the settlement agent during the closing of a home sale.

  • Responsibilities include document preparation, fee negotiation, and advising on legal matters.

• Final Walk-through: Buyers should inspect the property before closing to ensure all agreed-upon items are present.

• Recording Deed: A legal document that must be filed in the local courthouse to formally transfer ownership from seller to buyer.

Loan Estimate and Closing Disclosure

• Loan Estimate:

  • Required within three days of applying for a mortgage. An estimate of the funds needed at closing.

• Closing Disclosure:

  • Must be provided three days before closing, detailing all final costs associated with the purchase.