To cloud or not ? - Posted by Michael Morrongiello
Posted by Michael Morrongiello on February 22, 2000 at 15:53:15:
If the seller of a note enters into an agreement with you ( a note purchase agreement or options agreement) and you have some concerns over him / her “wiggling” out of the deal later on, then recording your purchase agreement or option agreement will serve to “cloud” the title of the note and perhaps even the property as well. You should only record if you get that intangible feeling that something is wrong…
I had a seller agree to sell me a note and during the due diligence and processing phase of the transaction the note payor found out that the seller was going to sell the note to us. Well you can imagine what happen; sure enough they reached their own agreement whereby the payor was to refinance and the seller would get more money from the payor than from me for the discounted note sale.
I immeditaly sent my purchase agreement which referenced BOTH the legal description of the real property and the mortgage references as well to be recorded in the county where the subject property was was located.
A few weeks later I get a call from the title company who was working with the lender and their refinancing loan wanting to know what was going on?
The bottom line: I put a stop to the payors refinancing at that time, still bought the note from the seller, and then worked a deal with the payor to pay me off at a slight discount to them. This put $19K in my pocket.
A word of caution about recording such language;
IF you intend to record your note purchase agreement or option agreement make sure the agreement states that it may be recorded at the note buyers option and that such recording may cloude the title to the property and or mortgage & note. In this way you cannot later on be accused by the note seller for a “Slander of title” lawsuit since you disclosed that you might record the agreement.
Consult with your attorney for more details.