A formal deed to transfer ownership of real property involves paperwork and signatures, but it is much wiser than a handshake.
Rule one: Whether you are giving away property, adding someone to a deed or selling the property, it is important to have a written deed, carefully worded so the document reflects the intentions of both buyer and seller. Rule two: State law requires a deed to be signed and recorded to be legally effective.
Suppose buyer and seller shake hands on a deal for a house and lot. Buyer makes payments for several years. Seller then dies. Buyer has proof that he made monthly payments, but no proof the payments were to purchase the property. Seller's heirs or legatees may argue that the monthly payments were rent, and buyer could be in danger of losing his investment.
In most property sales, real estate agents who know the process are involved. An attorney or representative from a title company will prepare the documents to transfer ownership.
You are not required to have a professional draft the deed. If buyer and seller prefer not to have an agent or attorney involved, they can draft a deed using a form. They must state the consideration, that is, the purchase price, in the deed. If the land is a gift, the deed should state that there is no consideration. The parties can have the deed notarized and recorded in the county land records office.
A risk buyer and seller are taking with their do-it-yourself deed is that they may have included unclear language that is open to challenge by someone who wants to claim the property. History provides stories of properties where someone who thought he owned real estate was dismayed to learn of a flaw that someone else discovered and exploited to claim the land.
Some property transfers are done through quitclaim deeds. In a quitclaim, the grantor giving or selling the property pledges only that he is ceding whatever interest he has in the real property to the grantee, who receives that interest. If the grantor had only part ownership, that is what the grantee gets.
Maryland is a race-notice state in property law, which means that claims to the property depend on land records. Seller can sell his property to buyer A. Neither party records the deed. Later, seller sells the same property to buyer B, who records the deed. Who owns the property now? Buyer B, who raced to the records office with the deed, putting other buyers on notice that he is now the owner.
After the deed is recorded, buyer A, who has been making mortgage payments, learns that he does not own the property. State law says buyer B's claim prevails if B did not have constructive notice original seller had already sold the property. Constructive notice is notice of the unrecorded deed that an inquiry would reveal. Buyer B must also have paid for the property to claim ownership.
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Donna Engle is a retired Westminster attorney. Reach her with questions or feedback at 410-840-2354 or email@example.com. Her column, which provides legal information but not legal advice, appears on the second and fourth Sunday each month in Life & Times.