Realtors®: What you need to know about deeds

By James L. Goldsmith, Esq.

When do you first see a deed relating to a sale in which you are playing a role?

Perhaps when you ask your clients if they have the deed so that you can make a copy for the file. Maybe as a buyer agent, you ask the listing agent for a copy of the last recorded deed so that you can provide it to the title company that will draft the new deed. Maybe you don't seek a copy now that a title company can obtain one over the internet with little effort.

You probably knew more about deeds when you prepared for the licensing examination than you do now. That is because there are rarely deed issues that involve you. When there is a problem with a deed or title, you were not the cause, had no reason to anticipate it, and are not part of the fix. If the problem arises before settlement, you wait it out until a repair is found. If the problem is detected after settlement, title insurers, title agencies and/or lawyers are involved.

Does this mean that you have no reason to know about deeds or to review them in connection with your transactions? The answer is, of course, no, as this article would otherwise be over. So what is it that you should know about deeds?

A proposed deed drafted in connection with the transaction is usually available for review shortly before settlement. Ask to see a copy. If you represent the buyer, you want to assure that the parties' names are correctly identified and that the spelling is accurate. If the names of the sellers are misidentified or misspelled, your buyers may have a problem establishing that they acquired marketable title.

Further, if your buyers take title in a nickname or name otherwise misspelled, they will revisit the problem at the time of resale. An inaccurate identification or misspelling is inexcusable, and you play a role in assuring accuracy.

As a buyer agent, you also want to assure your buyers are taking title as they had anticipated. If married, does the deed indicate that the buyers are so married? If not married, are the several buyers taking title as joint tenants with right of survivorship or as tenants in common? It makes a difference and therefore is a critical matter to check off your list of potential errors.

By the way, engaged couples cannot take title by the entireties and should be instructed to visit their lawyer as soon as possible after the wedding for purposes of reconveying to themselves as tenants by the entireties. (Note: While not the subject of this article, the matter in which multiple parties take title is critical and the need to review the differences with your client is essential. Whether the property will be subject to the creditors of one owner, and who is heir to a decedent's share, will all be determined based upon the form of ownership elected.)

All Realtors® should be able to read the average legal description and determine if there is any substantial error. The ability to trace the outline of the property based upon the metes and bounds and distances is not particularly difficult. You should be able to determine whether the general outline of the property is of a specific geographic shape that comports with what the buyers were told. Title companies have software that will plot the boundaries of a property on paper from the description and if you have access, it's worth asking for a plot diagram. This may be the only way to determine whether the description closes (the corners of the tract should all connect to form a comprehensive perimeter).

One of the most important parts of a deed that Realtors® should review is the title reference that usually begins "Being the same premises conveyed to Grantor in a Deed recorded at..." Why it's important to read this clause is illustrated by the following.

Sellers were the owners of two tracts separated by a common boundary line. The sellers' home was on one tract, a rental on the other. They caused their rental tract to be subdivided, so that a portion of it could be annexed to the tract on which they lived. The rental tract that they intended to sell would thus be smaller. When the rental tract was sold, a deed for it was prepared by the buyer's title company.

Unfortunately, the subdivision was mis-indexed at the courthouse, and the title company never learned of the subdivision. Thus, when it prepared a deed for the rental tract, they used its older, larger description. Had the sellers' agent read the title reference stating that the rental tract was the "same parcel" as the sellers purchased, the mistake would have been found. After all, the sellers were not selling the same tract, but selling the same tract less a portion that was subdivided. A lawsuit would have been avoided.

Agents have a role at the settlement table. It is the role of the agents to determine that the obligations imposed on the parties by the agreement of sale have been satisfied. It may also be argued that licensees have a duty to briefly review a deed for those glaring mistakes that are readily apparent.