What If the Deed Is Not Recorded? (Never Let This Happen.)

By accepting a deed, you become a new property owner. Be sure to file the deed you accept with the county recorder’s office. The recording becomes your public notice that you now own the property described on the deed.

You might have heard that a deed works to transfer property as soon as it’s offered and accepted. True. The current owner just needs to sign it over and deliver it to the new owner, who must agree to receive it. But while offer and acceptance covers the basics, recording is critical.

An unrecorded deed can cause unintended problems for the deed holder and others. Read on, as we look at potential scenarios.

Here’s Why Public Notice of a Deed Transfer Matters So Much.  

There’s a lot to be said for the prompt recording of a deed. For one thing, a recorded deed can connect a new owner with access to home loans. Once in the records, a deed shows up in a title search, so lenders and financial groups can verify your ownership and offer financing based on the value of the asset you own.  

But it’s not just a lender who needs to confirm that you are the official deed holder. The public in general needs to know that you now own the property.

Imagine if the person who conveyed ownership to you conveyed a different deed for the same property to someone else. Imagine that other person thinking that they own the property, just as you do. And they can hardly be blamed for thinking that, because you never recorded your deed. What now?

You could lose your ownership rights to the home.

If someone else gets a deed to the same property you got, and that someone considers that deed valid, then that subsequent deed recipient could have a stronger ownership claim than yours, with your unrecorded deed.

Who Wins, in a Duel of the Deed Holders?

It depends on state laws that say who keeps the home — you, with your unrecorded deed, or the other unsuspecting buyer.

The unsuspecting buyer comes along and buys the home, months or years after you were given the deed to sock away in a drawer. In other words, the person who gave you the deed created and transferred a newer deed — and not to you!

The unsuspecting buyer is acting in good faith. The person knows nothing about your unrecorded deed. The person is someone you’d call a bona fide purchaser (BFP). And a BFP who records the deed is normally considered the legitimate property owner.

That is, under a rule preserved by many states, an unrecorded gift of a house deed loses its validity once someone buys the house without knowing of the earlier gift. In the devastating scenario in which the prior owner transferred the same property to you and then to someone else, your state law might turn the matter into a “race” between you and the other deed holder to record your claims.

In fact, some states’ laws treat this scenario as a pure race between the two of you to record — even if that buyer knows you received the deed first! Why take chances? Record the deed ASAP.  

Of course, in most ordinary home deals, there’s no worry about an unrecorded transfer. An escrow agent submits the deed to the county recorder’s office for filing.

And now, some states offer electronic deed recording in every county. With eRecording, our legal documents are returned to us in minutes, electronically. And they’re searchable online.  

Set up an account with Deeds.com to eRecord your documents today.

In the Pocket? That’s Not Where a Deed Belongs…

You might have heard about a recipient “pocketing” a quitclaim deed to record it later — perhaps after the transferor dies. Maybe the homeowner wants to give the home to a loved one without subjecting the home to a transfer tax or gift tax, or without putting the home through probate. So, instead of leaving the home in a will, the homeowner gives the deed to the intended beneficiary, saying “Hold onto this and record it after I’m gone.”

As our readers know, a quitclaim is a legal document that transfers a property interest from one person to the next. Relatives, or people who know each other well, might choose a quitclaim for a stress-free deed transfer. A small business owner who’d like to put the property under a business name might also decide to use a quitclaim deed.

Whenever a deed goes from one party to another outside of a standard home purchase situation, it’s more likely to be left unrecorded.

And think about this. The transferor of the deed could be helping you out more by leaving the home to you through a last will. Each of you should speak to your tax professionals. A tax pro can tell the current homeowner and yourself about the advantages of a will or revocable living trust. A growing number of states offer the option of a transfer on death deed for real estate, so that’s another option to consider.

Are you in the know about deed recording? Test your knowledge with Deeds.com.  

…And Here’s How Pocketing the Deed for Later Will Backfire.

Now, let’s look at a couple of ways pocketing the deed for later recording will backfire:

• Leaving the deed unrecorded doesn’t stop a tax bill from adding up. Owners must pay taxes as required by law. Various levels of government can record liens against the property’s value to recover unpaid taxes.

• When the homeowner dies, if you step up to record an unrecorded deed, you can’t demonstrate a voluntary delivery of the deed from the transferor. Avert challenges to your ownership rights by recording a deed promptly.  

If the chain of title has become muddied, you or future buyers will likely run into snags when trying to get title insurance for financing the home. Title companies might even require a court declaration of ownership.

Test your knowledge: What is a clear title?

There’s Just No Good Reason to Wait. Record That Deed!

As you now know, unrecorded deeds can lead to conflicting claims of ownership by multiple people. So, recording a newly received deed as soon as possible really matters. It’s always best to keep a clear, unambiguous, and publicly searchable chain of title.

Finally, a reminder that we share this article to offer general information for our readers. Nothing on this or any other website constitutes situation-specific legal or financial advice. For questions that impact your legal rights, speak with a local real estate attorney, and get the guidance that fits your individual situation.