Settlement, but no keys or deed?

Members are telling me that now more than ever before, settlements are being conducted by out-of-town title companies. There are also more banks and lending institutions selling residential real estate than ever before. This combination has led to some unusual settlements.

One transaction, now in litigation, involved a lender/seller that failed to produce a deed and signed HUD-1 Settlement Statement at closing. The out-of-town title agent claimed that these items were forthcoming, took the buyer’s money and left town! The buyer took possession and began making extensive renovations only to find out several weeks later that there was still no deed and no HUD-1 signed by the seller!

We are aware of other circumstances where sellers are refusing to give keys to buyers until the deed is recorded. This, like the first scenario, should not be permitted; after all, the Agreement of Sale provides that possession is to be delivered at settlement.

Keep in mind that settlement is where the buyer gives the seller money in exchange for title and possession. A buyer should never pay money without taking ‘delivery’ of a deed. A deed is delivered when it is presented to the title agent on behalf of the buyer for purposes of recording.

Likewise, when money is paid and a deed tendered, the keys must also be delivered to the buyer. At that point, it’s no longer the sellers’ house, what right do they have to keep the keys?! When a deed is delivered the buyer is now the owner regardless of whether the deed is recorded. Recording the deed is critical for obvious reasons (e.g. conflicting claims of ownership), but the act of recording happens after the deed is delivered and title passes to the buyer. When a seller can’t deliver possession (or assignment of leases) and title (deed), or when the buyer is unable to pay the purchase price, settlement does not occur! While elementary, this concept is lost many times in today’s market where the unusual has become the norm. Stick with basics and you will not be caught in a disciplinary complaint or civil litigation.