Can The Seller Be Prevented From Selling A L/O House During The Contract?
Does anyone know if there is a way to prevent a seller from selling their house after signing a lease option agreement with me?
It seems I read somewhere there is a contract or document that can be signed by both the seller and buyer that when recorded with the county can cloud the title, which effectively prevents the owner from selling the house.
Obviously my concern is if I make 6 months of payments on a house and the owner turns around and sells it I have to go to court to enforce the L/O conract.
Thanks!
I think I did this the last time I posted a question on this forum...I'm answering my question myself!
Just minutes after posting this question I found the following link by William Bronchick to be very helpful, but if anyone has additional ideas or methods for protecting the option I would be very interested.
****Must Reach Freshman Investor status before posting URL's***
Well, since I can't post URL's yet, here is a blurb from Mr. Bronchick:
"Here are three good ways to protect your option:
Record the Option. If your option was signed before a notary, you can record your option in the public real estate records. This will give the world public notice of your interest. If the option was not notarized, you can sign an affidavit called a "memorandum of option" and file it in the real estate records where the property sits. Keep in mind that this does not create a lien, it only creates a "cloud" on the title.
Escrow the Deed. If your seller has died or disappeared, you will have a big problem getting him to sign a deed. An escrow should be created up front in which a title company or attorney holds an executed deed. When you are ready to exercise, you simply tender the money to the escrow agent and collect the deed.
Record a Mortgage. Typically a mortgage is recorded to securepayments on a promissory note. A mortgage can be recorded to secure performance of any agreement, even a purchase option. You as optionee (buyer) will now be a lienholder, in the same position as a secured lender. If the seller refuses to sell the property, you foreclose. Now the seller has to go to court to protect himself, rather than the other way around. "
I think that Bronchick originally was from the Sunblist Sub in Fishers.
His three ways are probably OK. But, since I just don't act as the sandwichman in L/O and never as the L/O tenant-buyer I can't be sure.
I do know of memos of options that have been overlooked by Title companies and have been insured over.
Putting the deed in escrow with a Title Co will work if you can get a Title company to agree to that. Many don't like insuring a property with a deed signed 3-5 years prior to their use. That's for you to explore.
The last way has always been a puzzlement to me. This is a performance mortgage. If they don't perform--you foreclose. O.K. what is the monetary value of the default? This mortgage would in most cases be junior to other debts.
Generally when you foreclose its only for the amount for the debt in default. So how much is the failure to perform worth??? The option price? The option price less the senior liens?? The equity in the propety??. I'm thoroughly confused about this.
Thanks Sammy.
I don't live far from Sunblest, but then in Fishers no one lives far from Sunblest.
Bronchick's first suggestion was the one I had heard about...being able to cloud the title. That should be enough for most cases to prevent the property from being resold. Realistically in most situations the seller is not gonig to play games with you and try to resell the property after you agree to an option purchase.
Speaking of which, why don't you do sandwhich options? Do you see a problem with them or is it you just stay away from that part of the business?
It seems to me that sub two-ing or sandwhiching are about the only two ways to get owner financing on a property that does not obligate the buyer to pay for the entire thing...?