How ownership transfers vs. how recording works

Under property law, two separate events matter: (1) transfer of title (the legal conveyance) and (2) public notice of that transfer (recording). In New Mexico, a properly executed and delivered deed transfers title whether or not the deed is recorded. Recording the deed, however, gives constructive notice to the world and protects the grantee against later claims by third parties who acquire rights without notice of the earlier conveyance.

Because recording and conveyance are distinct, money held in escrow or trust may sometimes be released even though the deed has not yet been recorded—provided the escrow instructions or closing conditions have been met and the parties are comfortable with the resulting level of risk.

When releasing trust or escrow funds before recording is commonly allowed

• Escrow/closing instructions expressly permit release once the deed is executed and delivered, title insurance is issued, or other closing conditions are satisfied.
• The buyer receives a fully executed deed and a title insurance commitment or owner’s policy is issued covering the transaction; the title insurer accepts risk even if the county recorder has not yet stamped the deed.
• Both parties sign a mutual written agreement authorizing the escrow holder to disburse funds upon certain listed events short of recording.
• Delays in county recording are known and documented (e.g., temporary backlog at the clerk’s office) and all parties agree in writing to use a recording affidavit or holdback to address the short-term risk.

Why many sellers and buyers insist on recording before disbursement

• Recording creates public notice and reduces the risk a third party later claims the property or files a lien that predates the buyer’s interest.
• If funds are released before recording and a dispute or defect appears, undoing the disbursement can be slow or impossible without litigation or a title insurer stepping in.
• Recording clears chain-of-title questions for future lenders or buyers and is often a condition for mortgage payoff or lender funding.

Common protective measures if funds must be released before the deed is recorded

To reduce the risk when parties choose to disburse before recording, consider one or more of the following:

• Require an owner’s or lender’s title insurance policy issued and paid for at closing. The insurer’s commitment can justify releasing funds because the company agrees to insure title defects subject to its policy terms.
• Use a short-term escrow holdback: place a limited sum in escrow to cover outstanding exceptions, property taxes, payoffs, or other contingencies until the deed is recorded.
• Get a signed affidavit from the seller confirming no outstanding mortgages, liens, or other encumbrances that would defeat the transaction.
• Obtain a recording receipt or tracking number from the county clerk showing the deed has been submitted for recording—even if the official entry is not yet on the public record.
• Include clear escrow instructions that define exactly when the escrow agent may disburse funds and allocate responsibility if a post-disbursement claim arises.
• Require wire verification procedures and follow safe-funds protocols with the escrow agent or title company to prevent fraud.

Risks and consequences if funds are released before recording

• If someone else later records a conflicting deed, lien, or judgment with priority, the uninformed buyer may face loss or litigation.
• Fraud: if a forged or unauthorized deed is later discovered, parties who disbursed funds may have to rely on title insurance or courts to correct title and recover money.
• Payoff issues: lenders who expected payoff after recording may refuse to accept a pre-recording disbursement if their payoff demand required recording first.
• Delays or errors in recording may create gaps between the time of disbursement and the time the buyer’s interest becomes public, allowing third parties to act in the interim.

Practical checklist for parties and escrow agents in New Mexico

1. Read the escrow or trust agreement: ensure it explicitly authorizes the agent to disburse in the circumstances at issue.
2. Confirm deed execution and delivery: obtain recorded or notarized copies and the courier or clerk receipt if the deed has been submitted for recording.
3. Ask for a title insurance commitment: request issuance of an owner’s and/or lender’s policy before disbursement.
4. Negotiate a holdback amount for known exceptions or recording risk, with a deadline for release tied to recording proof.
5. Document written consent from all principals if the escrow agent is asked to disburse early; get indemnities if appropriate.
6. When in doubt, delay disbursement until the county recorder has stamped the deed and the public record shows the conveyance.

Where to look in New Mexico law and government resources

Recording rules, the effect of recording, and practical procedures are governed by New Mexico statutes, county recording rules, and common law. For statutory language and official texts, consult the New Mexico Legislature’s website and search the statutes for terms such as “recording,” “deed,” and “conveyance”: https://www.nmlegis.gov/. County clerk and recorder offices also publish local recording procedures and fee schedules—check the county clerk’s site where the property lies.