Posted by Jim on February 10, 2002 at 09:15:47:
Great job John,
you should also mention, having the seller hold title in a ‘Land Trust’ to hinder any further encumberances against the property, if the seller gets into any financial or legal trouble. Since, the seller’s name is no longer on the title, further liens or judgements would have a very difficult time attaching to the property.
Help with protection in a L/O - Posted by Sue M - CT
Posted by Sue M - CT on February 09, 2002 at 23:20:17:
Hi everyone! I am about to get started in L/O’s, have Matt B’s & Joe Kaiser’s courses plus I’ve read everything on this site, but I want to learn a little more about protection in a L/O. Are the memorandum of option and recording a performance mortgage the only ways or the most common ways to protect besides the contracts themselves? I think everything is finally starting to click for me but I’m one of those people who kind of wants all the bases covered. Can anyone give me a brief description of what a memorandum of option and performance mortgage are? I think I understand the basics from reading everything on the site but would love another description and opinions on how important it is to use one of these documents. Thanks in advance for any info! SueM-CT
Re: Help with protection in a L/O - Posted by JohnBoy
Posted by JohnBoy on February 09, 2002 at 23:38:07:
The contract itself offers no protection at all, other than obligating the seller to sell the property to you before the option expires.
The memorandum offers very little protection. It only clouds the title and “might” prevent the seller from selling the property to someone else. It doesn’t protect you from other liens that could be recorded against the property caused by something the seller did.
The performance mortgage offers the best protection because you could use that to foreclose on the property should the seller breach his contract or cause other liens to be recorded against the property. Any liens caused by the seller to be recorded against the property would be second position behind your performance mortgage. If the seller didn’t have the money to pay off the liens so you could get clear title then you could foreclose on the property and have the liens wiped out through foreclosure.