What Is An "escrow Deed" Or "pocket Deed"
Owner is financing and her attorney wants an "escrow deed" - can someone explain?
Owner is financing and her attorney wants an "escrow deed" - can someone explain?
The attorney wants you to execute a deed that transfers title back to the seller if you default on your loan.
The deed is not recorded, but instead is held by the attorney (held in escrow). If you default, you are in effect giving the seller a deed in lieu of foreclosure. When that happens, the deed is recorded and the seller once again becomes the titled owner of the property.
Thanks Dave. Is this Standard for "Owner Financing"? Any drawbacks to me as a buyer?
Whether it is standard or not, it is a smart move by the seller. There should be no adverse consequences as long as you continue to pay the mortgage.
For all that it is a smart move by the seller it may not be a smart move for you. If you default under normal circumstances then the lender (in this case the owner) has to foreclose on you. This means you have certain protectons including having your side of the story heard by a judge. If you've given a deed in lieu to be held by the seller your leverage in that situation goes way down. Seller mearly records the deed and you're out. Now you have to go to court to try to proove that your default was not material.
For example. Lets say something comes up and you miss two mortgage payments. That is certainly a default and maybe even a material one. But most states have some requirement that mortgages in such circumstances can be re-instated so if you subsequently made up the late payments you'd be ok.
Unless there was an unrecorded deed someplace in which case you are up the proverbial creek. The seller unilateraly calls your default material and records the deed. Your downstroke and any payments you have made are gone. You can sue to attempt to get the deal re-iinstated but the burden of proof is on you.