Story of the Wrong Seller
Posted by: kateg 3 years, 11 months ago
What happens if you buy a house and find out the “Seller” isn’t the Owner of the property?
What I love about my job is that no two days and no two transactions are alike. Recently, we closed escrow on a property in Coronado that was owned in a Trust. The Owners also had the neighboring parcel for sale, and that parcel sold while we were in escrow on our parcel.
When it came time to close escrow on our parcel, the Title Company noticed that the Owner had changed. Turns out, when the neighboring property closed, the Grant Deed was written such that they included the legal description for the property we were under contract to purchase. In other words, based on the Grant Deed, the Buyer of the neighboring house now “owned” the parcel we were purchasing.
So what happens now? Obviously, errors can happen in a transaction. In this case, the person who drafted the Grant Deed made the mistake, and no one caught it prior to recording the Grant Deed. Surprisingly, this can happen all the time, which is why it’s important to read your Preliminary Title Report.
Typically, however, this happens where the Grant Deed includes a parcel with a different Owner. For example, if you were to sell your house, the Title Company may inadvertently include your neighbor’s home, which you don’t have the right to sell for them. In this case, it was a bit trickier since the properties were owned by the same family, and therefore they did have the right to sell it.
By the time we learned of this mistake, it was already two days after our scheduled Close of Escrow (the delay caused in no way by the Buyers), so we were anxious to get it resolved as quickly as possible.
When errors like this occur, there are a number of ways to handle it. A few of those solutions are listed below (but there may be more, as I am not an attorney, and this is not intended to provide legal advice):
1) Draft a Quitclaim/Correction Deed that reinstates the Sellers of the property as the Owners for the land that was erroneously deeded to the new owner. This requires notarized signatures by the original Sellers, which in this case there were approximately 7 signers.
2) Have the Buyer Deed back the entire property to the Sellers and simultaneously have the Sellers reissue a Grant Deed for the parcel that the Buyer was supposed to buy. This is a clean option from a Title standpoint, but time consuming from my Buyer’s standpoint.
3) Have the Buyer Deed back just the portion of the land that was inadvertently deeded to him.
4) Go to Court for a Quiet Title Action
Since there were 12 Sellers for the property, it was easiest to have the Buyer deed the parcel back to the Sellers, which was the simplest option from my standpoint, but required the Buyer’s cooperation. Thankfully, he was cooperative and we were able to record the modified deed.
Despite the headaches, it’s nice to know that in most cases, where there’s a problem, lies a solution. A large portion of my job is to manage the stress and mitigate any problems that arise in a transaction. The more experience I get, the better I am at handling these problems. This is (roughly) my 42nd transaction, and with each transaction, I learn something new. Now I’m off to prepare for a new listing! Cheers!
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