Protecting Yourself in Un-Recorded Deals

johnmerchant profile photo

Ah, you've got a problem!



You and the owner of that neat house have a deal, in writing now, where he's agreed to sell you that house if you'll just make his payments, or whatever.



But you just learned he's busy trying to go around you and sell to somebody else for higher figures! Wow! How can the turkey do this? Isn't it illegal?



More important...what can YOU do to stop this deal in its tracks and force him to deal with you and get you paid before his #2 deal is closed?



There is a method that's been used that does exactly this. It totally freezes things so the new buyer, if he's expecting a title policy, cannot close and the turkey of a seller cannot sell, until he deals with you and gets a release from you...or honors his original deal with you and tells # 2 buyer to go away.



You'd record a simple little doc. called Notice of Interest in that RE, with the deed recorder in that county, setting out the parcel number of the RE, your name & address, and the date of your interest's origination. Not a whole lot of info,but enough to "cloud" the title and keep a new title policy from being written by the title insurance company.



Title companies, in general, don't like this, and you might get chilly phone call from a title co. officer demanding to know what this is about and demanding it be released at once.



If this happens, you tell them you have some superior rights to the property and that's ALL you tell them. You don't have to explain yourself to anybody, and the owner knows what it's about and why you've done it. Tell the title co. person if he'll give you a written request, you'll pass it along you to your lawyer. Period. Say nothing else.



Guarantee this keeps you in the ball game and you will be hearing from the owner or his lawyer. Tell them you'll pass it along to your lawyer and they can deal with him.



Be aware there is at least one state, CA, where this cannot be done. In CA, they have a short "laundry-list" of items that can be legally recorded: deed, mortgage, deed of trust, etc.



So what to do there?



Well, I had this happen. So I prepared and recorded a new Deed from me to an entity I control. Although I had NO deed from my owner/seller, and he had dis-honored his agreement with me and was trying to sell it around me!



I actually got a call from the recorder's office, demanding to know what this was all about. I figured the owner had asked them to call me.



The clerk asked me how I could GIVE a deed when I had never GOT a deed! Pretty nervy of me was the attitude I picked up from her.



What I thought was: pretty nervy of a recorder's clerk to question me! They were WAY out of line getting involved in a private matter.



I gave them the same run-around I describe above, and basically told them nothing.



It got me paid what the guy owed me.

Comments(22)

  • jorge1215th August, 2003

    FYI: Please note that in many states whatever document you file, call it a Memorandum of Agreement, Notice of Interest, or whatever, must be notarized in order to be recorded.

    • JohnMerchant5th August, 2003 Reply

      Absolutely right! So far as I know, NO state will allow a recording if it does not have NP's signed acknowledgement.



      Only reason I didn't mention it is because to my knowledge the NPA (notary public's acknowledgement) is a universal requirement in 50 states, and so long as one is recording a unilateral (one party) doc like this, it's so easy to sign in front of NP, at bank, title company, check-cashing business, etc. All of which normally have a NP.



      Of course, your form, when you draft the Memo/Notice, should include the blank NP's Acknowledgement under your signature line; then, when you sign in presence of a NP, he/she can just fill in the NPA's part & sign same and it's done and ready for recording.



      Where to find the NPA form? Any deed or D/T in your state will have the same basic form with the standard language contained therein.



      Or go on internet, find most any RE form for your state, cut & paste the NPA part and you've got it.

  • BobJensen14th August, 2003

    Not to be overly dramatic, but I think this is one of the worst tips ever posted on this message board.



    If someone ever tried to cloud the title of one of my properties with one of these inane little worthless pieces of paper, I'd have my attorney go after them tooth, fang and claw in a heartbeat.



    If you give a deed on a property without having the legal authority to give one you are just asking for legal sanction.

    • JohnMerchant14th August, 2003 Reply

      NO, I do NOT recommend doing this where one does NOT have very good written contract or legal position on position.



      But how often on this site do we see that, despite the P & S Ageement being signed and in place, awaiting closing, do we see that the Seller has now decided to circumvent that buyer and do something else?



      That's the kind of thing my recommendation comes into play.



      But, never, never do I recommend doing this where the buyer does NOT have an ironclad legal position on the RE!


  • robertmichon5th August, 2003

    Congratulations on your "newbie" status wink



    Do you make it a practice to record an interest on all of your deals?



    If not, at what point would you do so?



    Ie, when calls are not being returned?

    • JohnMerchant5th August, 2003 Reply

      I can't recall a deal when I did NOT record this little Notice.



      It's cheap, easy to prepare, and quietly slipped into the Deed Records.



      Like the man (Teddy Roosevelt?) said. "Trust all men-but cut the cards."



      It's got me paid in several deals where, otherwise, I might have had to get noisy with the other guy.



      Interesting too-where I have heard ANY fussing about it, I've wondered what the other guy had in mind! And suspected it maybe did upset his little plan.



      This got a RE Broker friend of mine $25K on a listing that the RE owner was about to sell (took a quiet private contract, without my pal, who'd spent a lot of time & money marketing it) without "remembering" the listing agreement.

  • dna8165th August, 2003

    Do you have a title company or attorney record this document or is it something you do yourself at the county clerk office?

    • JohnMerchant5th August, 2003 Reply

      No, it's too simple to bother anybody else or pay for.



      Just take it or mail it to recorder, along with your money order and request that they record it in deed records, and please return your copy in the sase you've provided, marked with the same time/date stamp which they just used to stamp your original.



      A short phone call to the recorder will get you the cost of recording. Usually per page cost.



      They normally will not take a personal or business check from anybody (except maybe a title company or local attorney with whom they've had a lot of business).

  • dmarketing5th August, 2003

    Johnmerchant,



    A big thank you for your article! I'm currently in a situation where it looks like I'm being stiffed for my money. So your article provided a big light in a dark tunnel.



    I'll be using this "Notice of Interest" technique for NOW on! It beats going to court.



    Thanks again for this instructive and invaluable info!



    dmarketing


    • Dreambuilder6th August, 2003 Reply

      I would NOT recommend that this is the way you do this. Especially the second way where you are deliberately and FALSELY clouding title and you can be sued.



      Instead, what I DO recommend is that you take out a promissory note on the property. Whatever money you give the HO or for whatever equity is in the property is now protected by a RECORDED promissory note for what you think you will make on the property.



      When someone else wants to clear title they have to pay you off. If the HO refuses to sign the promissory note for money you are giving him then you know something is fishy. This is also a great way to then sell the property with your name never appearing on title. This helps BOTH with seasoning and dealer status issues.



      Dreambuilder

  • Dreambuilder6th August, 2003

    would NOT recommend that this is the way you do this. Especially the second way where you are deliberately and FALSELY clouding title and you can be sued.



    Instead, what I DO recommend is that you take out a promissory note on the property. Whatever money you give the HO or for whatever equity is in the property is now protected by a RECORDED promissory note for what you think you will make on the property.



    When someone else wants to clear title they have to pay you off. If the HO refuses to sign the promissory note for money you are giving him then you know something is fishy. This is also a great way to then sell the property with your name never appearing on title. This helps BOTH with seasoning and dealer status issues.



    Dreambuilder




    • alfalogic7th August, 2003 Reply

      Hi, Dreambuilder



      thanks for your input. That what makes this forum so great. Can you elaborate on your approach? In my (newbie) understanding the promisory note is the document which records a promise to pay. What exactly is the HO promising to do? And why would he/she sign something like this?



      Best regards,

      alfa

  • Dreambuilder6th August, 2003

    I would NOT recommend that this is the way you do this. Especially the second way where you are deliberately and FALSELY clouding title and you can be sued.



    Instead, what I DO recommend is that you take out a promissory note on the property. Whatever money you give the HO or for whatever equity is in the property is now protected by a RECORDED promissory note for what you think you will make on the property.



    When someone else wants to clear title they have to pay you off. If the HO refuses to sign the promissory note for money you are giving him then you know something is fishy. This is also a great way to then sell the property with your name never appearing on title. This helps BOTH with seasoning and dealer status issues.



    Dreambuilder




    • JohnMerchant6th August, 2003 Reply

      "Whatever money you give the HO or for whatever equity is in the property is now protected by a RECORDED promissory note for what you think you will make on the property".



      I really cannot figure what you're talking about. First, one cannot record a promissory note! D/T or mortgage, yes, but note, no way.



      Secondly, you're vastly mistaken if you think the party with a written agreement has no legal right to cloud the title. He has EVERY right to do so IF, and ONLY if he has the deal in writing giving him rights in & to the RE.



      Sued? By the crook who's trying to cheat me?I'd love it if I were to be sued, when the Plaintiff (suer) is the one who's bent on cheating me! I'd respond with an answer and cross-action and counter suit that would blister his hide! Trust me, if the other guy is busy trying to cheat me, that's the last thing he's going to want.

      • Dreambuilder6th August, 2003 Reply

        A mortgage is nothing more than an instrument securing a promissory note. So you are correct that you would record the mortgage to show that you have a equitable interest in the property BASED on the promissory note signed by the homeowner.



        You DO NOT have the right to record a deed (the 2nd way you suggested) for a property that you have not received a deed for. It IS illlegal. That's why there are closings. If I signed a contract to sell you my house without giving you a deed, you can't just go a record a deed against my house. It is not yours yet.



        Everything you are suggesting is confrontational. IF you really had an agreement with the HO then have him sign a promissory note to protect your position. NOW you HAVE a EQUITABLE interest in the property. Unless you have a mortgage or a deed you have ZERO interest in the property.



        I'm open that if he tried to go around you, you could also put a lien against the property but you CANNOT simply go and record a deed that you do not legally have. You CAN be sued. What you are suggesting is counter suing which is typical of people who try to STEAL people's homes. If you really bought is home, he'd have no problem giving you a deed or a promissory note.

    • JohnMerchant6th August, 2003 Reply

      I'm not going to continue to debate some layman over law, which you clearly do not know. Having been a lawyer for many years, I stand by my suggested procedure, with a lot of legal knowledge, which it is clear you don't have.



      In fact, and this is the last of my rebuttal to you, I challenge you to find and cite to me, by volume and page, ANY law or court decision in the USA, from ANY state, backing your layman's "legal" opinion. If you can & do, I'll be very happy to issue an apology to you; if you cannot, you'll issue an apology to me for using words like illegal and steal.


      • Dreambuilder6th August, 2003 Reply

        John,

        Your reply is typical of the way you obviously live your life - attacking, condescending and demanding. The same way you treat your homeowners WHICH is the very reason they would try to CHEAT you in the first place. If you believed and practiced WIN/WIN you wouldn't have the problems you've had.



        Do not even attempt to TELL me what to do. You have your opinion, I have mine. I am comfortable with leaving it that way. Your desire to hide behind a law degree is fine but I, and I am sure others on this site, have met a TON of lawyers who have NO idea about what we do. I should have known from the start that this would be your final stance since your solution for everything is to be dishonest -

        (“So I prepared and recorded a new Deed from me to an entity I control. Although I had NO deed from my owner/seller”)

        and to litigate –

        (“Tell them you'll pass it along to your lawyer and they can deal with him.”)



        All you are recommending is that we piss people off –

        (“Title companies, in general, don't like this, and you might get chilly phone call from a title co. officer demanding to know what this is about and demanding it be released at once.”

        (“The clerk asked me how I could GIVE a deed when I had never GOT a deed! Pretty nervy of me was the attitude I picked up from her.”)

        when there are so many easier, nicer, more productive and obviously LEGAL ways to handle this.



        With that said, I think the readers can decide for their selves. Do this business giving people the run around, doing shady things and then fighting with them when they call you on it. Or operate your business with integrity and honor so there’s no way your homeowner will try to screw you and cover yourself upfront so he knows he can’t even if he wants to. It will avoid the angry conversations it sounds like John has every other day.



        Dreambuilder

  • pcglobal18th August, 2003

    If you really have an interest in this property, then clouding title is your right. Anyone can sue for anything they want, remember that. However, if you could title and you have a reason for doing so, I would highly doubt a succesfull lawsuit against you. Using a memorandum is a good idea if you have a transaction pending. I think if its a real deal, why not just have a Q/C signed or a promissory note attached? Then again, a promissory note will get paid if the property sells while a memorandum will hold up an actual sale until title is cleared

  • jhgraves16th September, 2003

    Notice of Interest is a legitimate way of securing a legitimate interest in the property. If you have a deal in writing, which you should since this is real estate after all, just record the writing. There is also a little thing in the majority of states known as slander of title. If you cloud the title without right, as you did when you recorded a grant that wasn't a grant, you can be sued for damages for blocking the sale as well as punitive damages because your acts were clearly intentional, malicious, and in disregard for the rights of the seller. Highly reccomend that no one try this.

  • jhgraves16th September, 2003

    I apologize in advance for the bold face, I got a little carried away. No offense was meant to anyone.



    Johnmerchant, as an attorney you will appreciate the following citations, per your request: 769 P.2d 146, 847 P.2d 333, 911 P.2d 1209, 223 P. 170.



    I also forgot to mention toritious interference with contractual relationship: 593 P.2d 427, 911 P.2d 1210, 894 P.2d 1060.



    Additionally, as a professional and officer of the court, I would doubt that your state's bar would smile on filing false documents, making material representations to a public official, etc.

  • Lufos16th September, 2003

    If I were the cad that owned the property that had promised to sell to you and now went elsewhere. All I have to do when your recorded document pops up in front of the title officer is, Bond the item. Title Company will then write around the item. You have a period of time to file an action but it is limited. Bonding is rather a well used method to get rid of all those crazy things that pop up when people do not properly record their goodies. A simple Trust Deed would have protected you if you could have got it and of course the note that it secured. Come on John, I know you, you could have lien'd or leaned on him a little harder and got your instrument to record. I hate "As to date transactions" people always seem to change their mind or are swayed by the duplicity of others.

    My ex wife modified my agreement to pay child support. raised the figure from $2,500 a month to $12,500 a month. Of course the ink was a little different so it failed. Moral: Do Not Put Off the Completion Of A Deal. Finalize, Execute, Record. Cheers, Lucius

    • abstractprone4th December, 2003 Reply

      There is also a thing called an escrow account where you put money until a deal goes through. If you are upfront about what you are up to maybe people wouldn't change their minds.

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