Defining the Bona Fide Purchaser in real estate transactions is critical for the new owner of a piece of real estate. For sale by owner deals, inheritances, and seasoned investors in the frenzy of a real estate boom can get caught purchasing what is already ‘owned’ by or sold to another party.
Beware of well-meaning family members remembering earlier days when hand-shakes sold a piece of land, first time homebuyers thinking professional help is unnecessary, and large families facing tough times wheeling and dealing with multiple properties and seller carrybacks.
All of the above scenarios can find a legitimate homebuyer or heir caught trying to prove they are the Bona Fide Purchaser. The Bona Fide Purchaser is the winner and the other party is the victim. The other party can be the sole heir, with will and a deed in hand that a hospitalized uncle gave. But the Bona Fide Purchaser is the neighbor who already paid money for the home weeks before so the uncle could pay his hospital bills. That deed was taken to a title company and recorded at the county recorders, where it was verified the uncle owned the home up until that moment of recordation.
Even seasoned investors in a rush at the courthouse can stumble into a situation where their purchase was preempted by an existing seller carryback between family members who recorded in the wrong county. Tough times forced a tax auction and the undiscovered recorded transaction, leaves the seasoned investor out of luck.