Un-doing a Contract? - Posted by John Katitus


#1

Posted by Brad Crouch on December 07, 1998 at 03:23:23:

John,

> How is a Land Contract voided by recording?

By a clause the seller may have in the land contract, to the effect that “this land contract shall not be recorded, and if the buyer records it or causes it to be recorded, or allows it to be recorded, then this contract is null and void and the status of the buyer reverts to that of tenant, and is subject to the eviction process. All monies paid by the buyer heretofore are forfeit in the event this land contract is recorded, or if a memorandum of this contract is recorded.”

> The history: I’m the white knight, who came out of
> the darkness just before foreclosure to bring the
> mortgage current in exchange for their equity. The
> house would have been sold at the Sheriff sale and
> their credit destroyed. I saved them from that. The
> people separated themselves mentally from their
> problem as well as their property. They will be happy
> to sign anything I ask them to.

Why not just ask them for a deed?

> How do I give up all control with a Land Contract?
> It’s a legal sale. I own the property. They have
> signed a deed held in escrow. What other control is
> there?

Sorry, you don’t own the property. It is not yours until the complete amount has been paid off. Just because the seller has signed a deed that is being held by a third party escrow does not mean the property is yours.

As long as the deed is not in your name, you cannot control the property as you may wish, at any time. That constitutes a lack of “total” control.

> The Land Contract is recorded for public notice. The
> seller cannot place a new mortgage against the
> property. I have less fear of the Due-on-Sale Clause
> police than of a seller screwing me up.

Most investors that I know of would sell on a land contract in a heartbeat. But very few buy on a land contract. I think there is one guy here who buys on a land contract whenever he can. I don’t remember his strategy exactly, but he gets rid of the properties right away.

Luck,

Brad


#2

Un-doing a Contract? - Posted by John Katitus

Posted by John Katitus on December 04, 1998 at 02:34:58:

I bought a property on Land Contract (before I learned the many benefits of Land Trusts). The Land Contract was recorded.

Now I would like the Seller (recorded deed is still in his name, signed deed is in escrow) to put that same property into a Land Trust and assign beneficial interest to me. I can handle the Land Trust part.

Can I rescind the Land Contract? Would I Land Contract it back to him?

Thanks, in general, for all the great input here.


#3

Re: Un-doing a Contract? - Posted by Irwin

Posted by Irwin on December 04, 1998 at 20:16:59:

Land trusts only come into play when you acquire title, which you won’t until your contract is paid off. A l/c seller would have to be a bit balmy to do what you suggest. You might assign your l/c to a l/t, but why?


#4

Re: Un-doing a Contract? - Posted by Brad Crouch

Posted by Brad Crouch on December 04, 1998 at 03:21:50:

John,

> The Land Contract was recorded.

Sometimes a land contract is voided by the act of recording. “Voiding” may not be the best thing if you loose all you put in so far, and your status reverts to that of tenant. Check your contract. You may no longer have anything of value . . . to anybody.

> Now I would like the Seller (recorded deed is still
> in his name, signed deed is in escrow) to put that
> same property into a Land Trust and assign beneficial
> interest to me. I can handle the Land Trust part.

Why in the world would anybody assign the beneficial interest in a land trust to you? Land contracts typically allow the seller to hold the deed until the agreed upon amount has actually been paid.

Or do you think the seller is going to exchange the beneficial interest in the land trust for the signed deed held by a third party escrow? Assuming you can convince the seller to do this, who pays the recording and transfer fees?

Also, I sure would like to hear the words that you intend to convince the seller with. The reasons why he should use a land trust after the deal is already “set”.

By buying via a land contract, you give up ALL control. Which is why most investors are reluctant to buy this way.

I am also curious as to your logic for recording the land contract. I am wondering whether or not there is an underlying loan with a “due on sale” clause. Wondering if this is so, why you’re not keeping a low profile with this transaction?

> Can I rescind the Land Contract?

Since it took two people to create the contract, no single party would have the power to nullify that contract, by themselves (except a judge). “Meeting of the minds”, remember?

> Would I Land Contract it back to him?

Do you perhaps mean to use a “quit claim deed”? To be held by the holding escrow company and released to the seller if you default. The seller should have insisted on this from the beginning.

Luck,

Brad


#5

Re: Un-doing a Contract? - Posted by John Katitus

Posted by John Katitus on December 07, 1998 at 01:23:39:

The new procedure is this:

  1. Seller signs Trust Agreement, making me Trustee.
  2. Seller signs deed assigning ownership to the Trust.
  3. Deed is transferred and recorded.
  4. Seller assigns Beneficial Interest to me.

Until the deed is in my name, I can’t deed the property to Land Trust. I hoped there was a way to void the Land Contract and we could just do the above procedure as if the Land Contract had never existed. The only parties to the Land Contract are me and the Seller, and I figure if voiding the contract is OK with us, there should be a way to do it.

Because I saved the Seller from foreclosure by bringing his mortgage current (my price for the property was that plus the mortgage balance), he will be happy to do anything I ask. Thanks for your help.


#6

Re: Un-doing a Contract? - Posted by John Katitus

Posted by John Katitus on December 07, 1998 at 01:10:20:

I appreciate your input. If there are errors in my thinking, I would like to correct them.

  1. How is a Land Contract voided by recording?

  2. The history: I’m the white knight, who came out of the darkness just before foreclosure to bring the mortgage current in exchange for their equity. The house would have been sold at the Sheriff sale and their credit destroyed. I saved them from that. The people separated themselves mentally from their problem as well as their property. They will be happy to sign anything I ask them to.

  3. How do I give up all control with a Land Contract?
    It’s a legal sale. I own the property. They have signed a deed held in escrow. What other control is there?

  4. The Land Contract is recorded for public notice. The seller cannot place a new mortgage against the property. I have less fear of the Due-on-Sale Clause police than of a seller screwing me up.

I now understand that the Land Trust should have been used. That would have solved these problems. Thanks.