THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Saturday, August 17, 1996 TAG: 9608160446
SECTION: REAL ESTATE WEEKLY PAGE: 16 EDITION: FINAL
COLUMN: About the Outer Banks
SOURCE: Chris Kidder
LENGTH: 116 lines
A Virginia reader bought a week of time share at an Outer Banks resort last year. A couple months later, she received a letter from the resort saying a mistake had been made and that the week was already sold to someone else.
``We have a signed and sealed deed from North Carolina saying the time share is ours,'' the reader writes. ``I want to know how we can have a deed to this property and it not be ours. Does this happen a lot in real estate transactions?''
Selling property that one doesn't legally own is not common but it does happen. Having a valid deed and owning clear title to the property are not the same thing.
I made an offer to purchase a lot a few years ago. The offer was accepted by the seller. But when my attorney did a title search before closing on the purchase, she found that the lot had been previously sold to someone else and was registered in their name.
Oops.
As it turned out, the man I was buying the lot from had a valid deed because the first buyers had defaulted and returned the deed to him. But he had never registered this transaction at the courthouse.
Fortunately for everyone involved, the previous owners were cooperative, necessary paperwork was completed and the sale eventually closed.
The transaction might have turned out much differently. Because the seller was financing the purchase, no mortgage company or bank was involved and I was not required to hire an attorney.
I could have relied on the seller as buyers often do in these sorts of transactions. He might have prepared a deed that I would have accepted as proof that title to the property was mine.
I might have had a valid deed but my title to the property would have been defective.
For a deed to be valid in North Carolina, it must be in writing; the grantor must have legal capacity; the grantor and grantee be identified and the property described; it must include operative words of conveyance and be signed by the grantor; and it must be sealed, delivered and accepted. A deed doesn't have to be registered, dated or witnessed to be valid.
Although it is illegal in North Carolina for someone other than a lawyer to prepare a deed on behalf of someone else, there is nothing to stop individuals from preparing the paperwork for themselves.
Title to property is conveyed by a deed but involves much more. According to ``North Carolina Real Estate'' by Hetrick and Outlaw, ``title, in relation to real estate, is the sum, the union of, all elements and facts on which ownership is founded, or by which ownership is proved.''
Title is affected by prior liens that may have been filed against the property and are not yet satisfied and by information recorded in previous transfers of the property. Misspelled names, erroneous property descriptions and other typographical or recording errors can create defects in title.
Although deeds don't have to be registered to be valid, they must be registered to ensure clear title. The Connor Act, passed in 1885 to encourage timely filing of real estate transactions, establishes North Carolina as a ``race'' state: whoever gets to the registrar of deeds with their paperwork first wins the right of ownership.
In other words, if the previous owners of my lot had sold the lot a second time and that second buyer had registered the deed, the first buyer (who didn't register his deed) would not be the rightful owner even though his transaction with the seller came first.
That's not to say the first buyer wouldn't have a legal bone to pick with the sellers, but they'd have to settle for some other form of compensation: title to the lot belongs to the buyer who registered the deed first.
What a pickle I could be in if I'd gone the do-it-yourself route.
What if the previous owners couldn't be found or wouldn't cooperate? What if they had sold the lot to someone else or conveyed a deed of trust on the property to a lender as collateral for a loan? I'd have a legal nightmare on my hands.
The Virginia reader's time share problem, though different, teaches the same lesson: Skipping buyer safeguards in any real estate transaction increases one's risk.
The question that arises here is what the reader could have done differently to reduce her risk.
Time share is the a fast food of the real estate business. You're dealing with volume sales and you typically bypass the usual real estate formalities.
Both buyers and sellers want their transactions to be as fast and inexpensive and as free from red tape as possible.
In fact, buying time share is more like the installment purchase of a washing machine than like buying a house. Your purchase is consummated on the spot, while you wait, with financing provided. (The deed for your purchase is prepared by the time share resort's attorney, recorded and mailed to you later).
In spite of this assembly line approach to sales, the risk of buyers not getting what they paid for is relatively small. Looked at statistically, the percentage of time share transactions that run afoul of the law is lower than any other type of real estate transaction.
Sure, the buyer could bring in her own attorney and do a title search before closing on the deal.
But when you consider that the average time share purchase costs less than a new car, the added cost may not be justified.
In both cases cited above, sellers sold - or tried to sell - property with defective titles. There's no question that both sellers breached a civil contract, says Blackwell Brogden, Jr., the North Carolina Real Estate Commission's chief deputy legal counsel. If such a mistake could be proved intentional, the breach might be fraud.
But most cases, problems with titles are honest mistakes. ``It's just something that happens,'' Brogden says.
Before time share developments were tightly regulated by the commission, there were instances of time share developers deliberately reselling the same week over and over again. It's not something he sees happening now.
To put the situation in perspective, Brogden says, you have to look at the consequences of what's happened. If the time share development notified the buyer as soon as the problem was discovered and tried to resolve the situation, then no harm's been done.
In any case, filing a complaint with the North Carolina Real Estate Commission will help assure that sales agents and developers are more careful about their record keeping in the future. They investigate every complaint received although the entire process, if a formal disciplinary action is warranted, can take up to two years. You can get the necessary paperwork to file complaints by calling 919-733-9580. MEMO: Send comments and questions to Chris Kidder at P.O. Box 10, Nags
Head, N.C. 27959. Or e-mail her at realkidd(AT)aol.com by CNB