Every transfer of real estate consists of a two-step process. First, there must be a land contract. This land or sales contract is short-lived and endures only until step two, the closing of the transaction.
A sales contract must typically be written, signed by both buyer and seller and describe the land. In every contract:
- The seller makes an implied promise to provide marketable title. Marketable title means the land to be sold is free from lawsuits and the threat of lawsuits. For example, title would be unmarketable if the land is in violation of an applicable zoning regulation or someone else claims they own it. Marketable title also means that there are no liens on the property from the seller's unpaid judgments
- The seller also gives implied promises not to make any false statements of significant fact. In most states, sellers may be liable for false statements about the property and for not disclosing hidden material defects they know or should know about
- When a builder-vendor sells a new residential dwelling to a buyer, the land contract contains an implied warranty of fitness and workmanlike construction. The builder implicitly promises the new home was built in a safe, inhabitable and fit manner
The contract usually gives the buyer a set time period allowing him to secure financing and to have a title search done. These are key steps to complete before closing the sale.
At the closing, a legal document called a deed passes ownership from seller to buyer. The buyer pays the seller the rest of the purchase price. The deed's form and execution must be proper, meaning it's in writing, signed by the parties and describes the land. It must also be delivered, meaning as a legal matter, the seller intends to be immediately bound by the transaction. Most deeds contain various promises known as covenants. These are the seller's promises that:
- He has good title to transfer to the buyer
- The land doesn't have outstanding liens or other claims against it
- The buyer's possession won't be disturbed due to someone else's lawful claims to the property
The final step after closing is recording the deed or other document representing the buyer's property interests or rights. Generally, the deed is taken to the county clerk's office and is filed and indexed in the public records. The recorded deed lets the world know who the land belongs to and gives the buyer certain rights against others who mights try to make claims related to the property. For example, after the deed is recorded, the previous owner's creditors can't file new liens against the property.
Questions for Your Attorney
- I bought a home and I just found out there's a lien against it. Will my title insurance cover this?
- I signed a contract to buy a home, but now I can't get financing. What happens now - can I get my earnest money back?
- When I buy or sell a house, who records the deed? Do I need to follow up and make sure it was recorded?