An Expensive Inheritance

A mother signed a deed giving 120 acres to her two daughters, or at least she and her daughters thought that had happened. After her death, the two sisters could not find the recorded deed; however, a stepsister found them.  The two sisters now had their stepsister as a partner in the 120 acres.  To really understand this debacle, let me tell the story the way it unfolded to me.

When I first met the two sisters, they told me the land had been gifted to them by their mother.  One sister lived in Colorado and the second lived in Missouri.  Within a few months after listing the property, we had a signed contract.   The sisters were delighted.  The buyer was paying cash.  Then three days before closing, I received a message from the title company,  “We have a problem.” 

 The problem was with two deeds that the title company found during the title search.  One deed from the mother’s estate transferred the 120 acres to three people including the two sisters.  A second deed transferred the 120 acres from one of the people in the deed to the two sisters.  If the deeds had been recorded in this order, there would be no problem. Regrettably, the deeds had been recorded in reverse order.

The county recorder’s stamp on each deed showed the date and time of recording to be just minutes apart.  One could surmise that both deeds were handed to the county recorder of deeds at the same time, only not in the correct order.  The deed transferring the property to the two sisters from the third  person had been recorded before the deed that transferred the property to the three people.  This meant that the public record showed that the third person still owned a one-third interest in the property and that was the problem.    

While it appeared the third person’s intent was to convey their ownership interest in the land to the two sisters, the title company wanted to remove all uncertainty before issuing a title policy to the new owner. This could be done if the third party signed a new deed conveying their interest in the land to the two sisters. Once this deed was recorded, the chain of title would show the two sisters as the undisputed owners of the property.  This appeared to be a simple solution to the problem until I spoke with one of the sisters.  Her reaction was a combination of anger and frustration. 

The sister said the third person was their stepsister.  The only time they met was during a contentious court battle three years earlier.  They had not spoken since and she was certain that her stepsister would not sign any documents that would benefit the two sisters. She then explained.   

About 45 years ago, when she and her sister were young, her father and mother purchased the 120 acres.  It was their  weekend getaway.   As the years passed, the two sisters moved away, married and had families.  Their father died.  Their mother remarried to a man who had one grown daughter. They had been married only a short time when he died, leaving his estate to his only daughter.  The two sisters had never met the daughter. 

After his death, the mother decided to give the 120 acres to her two daughters while she was still living.  She hired a lawyer who prepared the documents and he assured her that he would handle the entire matter including the recording of the deed.  A few months later the mother died.  After her death, the two sisters learned that the public records showed the 120 acres was still owned by their late mother.  Now the land was part of her estate.  What happened to the deed their mother had signed giving the land to the two sisters?

The deed transferring the property from their mother to her daughters had been mistakenly placed in the attorney’s office file and not recorded.  Since the deed had not been recorded before their mother’s death there was no transfer to the two sisters; thus the mother was still the owner at the time her death.  The land was now included in her estate.  This meant that legally the two sister and their stepsister would have equal ownership of the 120 acres.

The two sisters hired an attorney.  First, he contacted the mother’s attorney who would not admit to any fault. Second, he contacted the stepsister’s attorney.  He told him about the unrecorded deed. He asked if his client would sign a deed transferring her ownership of the 120 acres to the two sisters
which was the mother’s intent.  A few days later, he received a message from the attorney stating that his client would sign a deed only if she were paid one-third of the value of the property.  The property was appraised for $360,000.  The step sister’s share would be $120,000. 

The two sisters sued their mother’s former attorney for malpractice.  After two years of litigation and over $40,000 in legal expense, the attorney’s malpractice insurance company paid out $120,000, the amount owed to the stepsister.  When the stepsister was paid, she signed a deed transferring her one-third interest to the two sisters.  And that’s when the deeds were recorded out of order. 

After listening to the sister, I called the title company.  I explained why obtaining a deed from the stepsister was not an option, but there was another possibility.  The title company who had made the recording mistake would agree to provide an affidavit that acknowledged they made the error when recording the documents.  The closing title company was satisfied and the sale closed on time.

• Mistakes happen.  In this case, the mistakes cost time, money and stress. It almost voided a sale!  Here’s a couple of steps that buyers can follow that can prevent such costly errors:        
• Be sure you receive the original deed after it has been recorded.  A recorded deed will have the county recorder’s stamp showing the date & time of recording and either a document number or a book and page where the deed is of record.  Once the deed is recorded, your ownership is of public record, even if you lose the deed.   If you do not receive the deed within 30 days after the closing, contact the title company or lawyer that closed the transaction.  
• Review the title insurance policy that you should receive within 45 days after closing. Make sure the insurance policy has you as the owner of record.  There is a possibility that somebody could file a lien, etc. on the property between the moment the seller signs the deed and the moment your deed is recorded. Should that happen, then their claim or interest in the property would have preference over your deed.  The title  company is supposed to check for any such recordings before recording your deed, but then again mistakes happen.