Todd,
When I do a L/O deal, I do not get title insurance, but I do search the title.
You can do this yourself, or pay to ahve it done.
This way, you have some idea of what condition the title is in.
But, if the seller is willing to pay for title insurance, why not?
I’m just not sure what the point in doing so is?
The option will not be exercised right away, so will the policy be any good when it comes time to close?
Just make sure that your agreement says the seller is to provide clear title to the buyer, and that the seller cannot encumber the property any more than the purchase price in the L/O agreement.
This is not iron clad, but will cover you a little better should it get to litigation later.
As far as “Recording with the title company”, what does that mean?
You do not record a deal with the title company, that is done at the county recorders office.
I would not record the agreement itself, but a memorandum or affidavit instead stating that there is an agreement, but not the terms.
No need to tell the world what kind of deal you have.
Posted by Todd Ellis on January 17, 2000 at 20:47:34:
I need advice on a l/o deal I am trying to set up. Is it customary to get title insurance up front? I have a very motivated seller and I have a tentative appointment to see him Wed. night (two nights from now) to sign papers. My question is, do I need him to purchase title insurance at this point? I don’t plan on being in the deal very long. I am going to assign my position to a third party. I trust the guy and I’m sure there are no problems with the title, but my biggest concern is that the new tenant-buyer will have a problem with an unclear title when they are ready to purchase the house when their lease runs out. This could be a big problem since their option money and rent credit (their equity) could be at stake. Also, should I record this deal with a title company? Any advise would be much appreciated. Todd
What I would do if I were you is to have the title checked. What you’re looking for is any liens that aren’t supposed to be there. Once you know that the title is as expected…record a performance mortgage. What this will accomplish is to give your assignee the right to foreclose if the optionor cannot deliver title in accordance with the contract.
Normally title insurance insures title when it is transferred. In this case you’re not transferring title…so there’s little point to it in my opinion.
JPiper