Recording The Sale Of Real Estate Know The Law And Don’t Get Burned

By Bobby Carnes

In the United States, every state has enacted one of three different types of recording statutes to govern the official recording of a transfer or real estate from one party to another:

(1) Notice Statutes

Suppose you sell your house to Party A, Party A fails to record the sale, you turn around and sell the same house to Party B who doesn’t have ‘notice’ that you previously sold the house to Party A (that is, Party B not only didn’t know about the previous sale, he also had no reason to know about it). Now Party A and Party B wind up in court fighting over who owns the property because you skipped off to Tahiti with all your money and property, whose house does it belong to? In states with a notice statute, the house belongs to Party B, because Party A had a chance to record the previous sale but didn’t. The result would be the same even if Party B didn’t record his purchase either.

If Party A wants his money back he’s gonna have to fly to Tahiti and sue you there. In practice, this usually plays out when somebody buys a piece of real estate without knowing that the bank has a mortgage on it, because the bank neglected to record the mortgage.

Keep in mind that if Party B knew (or should have known) about the previous sale to Party A, Party B would lose even if he recorded first.

(2) Race Statutes

It’s a ‘race to the courthouse’, and the first one to record his purchase wins. In states with race statutes, Party B would win even if he knew about the previous sale as long as he recorded his interest first. Only a few states have race statutes – they are considered by most judges to be outdated and unfair.

(3) Race-Notice Statutes

Under this system, in order for a subsequent purchaser to win against a prior purchaser of the same property who didn’t record his prior purchase, the second purchaser will have to prove that he (i) didn’t have notice of the first purchase, and (ii) he recorded his purchase before the first purchaser did. The difference with the notice statute is that if Party B lived in a state with a race-notice statute, Party A could still win as long as he beat Party B to the courthouse to record his purchase.

DISCLAIMER: The following is intended for reference only and not as legal advice.

About the Author: Real Estate Law in Plain English explains real estate law without the legalese.

Source: isnare.com

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