Posted by Stacy (AZ) on April 11, 2002 at 18:55:20:
The Deed in Lieu makes no sense to me. When you sell on land contract, legal title (the deed) stays with you, the seller, until the contract is satisfied. How could a buyer sign a deed in lieu, when they were never deeded the property in the first place?
You might want to ask the poster on the other site if he understands land contracts.
Land Contract vs L/O - Posted by Cire
Posted by Cire on April 11, 2002 at 18:02:42:
I was reading another board and a couple of posters suggested Land Contracts over L/O. One of the posters said the following:
When you write the contract, in order to avoid the foreclosure process, have the buyer sign a Deed in Lieu of Foreclosure as part of the transaction. Also, buyers who want owner financing will usually be able to come up with at least $5K down, quite often even in the $10K range, so don’t treat it like a regular rental. L/O may still be the route you go, but realize there is an emotional side to being able to say that you “own” rather than “rent”, which helps negotiating the best terms for yourself. 
This is the first time I have came across this stategy. Does anyone here use a Deed in Lieu of Foreclosure to get a property back on a land contract??
Re: Land Contract vs L/O - Posted by JasonWDTX
Posted by JasonWDTX on April 11, 2002 at 23:35:59:
I have heard of a similar tactic using quit claim deed instead of a “deed in Lieu” That way if the buyer ever records the contract or an affidavit the quit claim deed will get rid of his interest if he defaults later on.
The main problem is most states have laws saying “nope, aint gonna work” (legal ease) meaning that if a buyer signs a quit claim deed at the same time he signs a land contract or similar agreement it will not hold up. So it really depends on if the buyer fights you or not. If the buyer records the contract, defaults, and skips town then the quit claim deed will probably clear your title. But if the buyer records the contract, defaults, screams and hollars about leaving, then the quit claim deed probably won’t work too well since the courts could make it invalid. I think the arguement is that a buyer can’t sign away his rights to a fair foreclosure at the same time he buys something. If the buyer signs a quit claim deed after the sale and for other consideration then it will hold more water. How long after the sale? I don’t know. If it is a week or two after the sale that could be too close unless there was some serious consideration that would entice a buyer to sign it. Its all up to the court and the intent of the parties and they really don’t think its fair for people to waive away their rights (especially uneducated buyers dealing with a professional investor).
I have found that most buyers on a land contract or LO end up leaving without a full blown foreclosure and the ones who stay for the long haul know enough to drag it out know how to spoil all the little tricks you tried to use to get rid of them easily.
So should you get a quit claim deed when you sell? If you can, why not. Just realize that it may be worthless, even though it could clear up a title in a certian situation. If a buyer fights you then it doesn’t matter to much if you have it or not, but if he skips town then it may be a good thing to have if he clouded the title. The chance of it doing any good seems small to me so I don’t bother getting it, but I may think about it some more and change my mind, who knows.
Jason
P.S. all the he’s up above also mean she’s (more legal ease)!!