How To Prevent Your Option?
I heard people saying there are couple of ways to protect your option from seller selling the property to someone else: 1) Recording the Option or Memorandum of option. 2) record a mortgage (performance mortgage) how exactly are they be done properly? How do I get those papers? from attorney? Is there a third method to protect yourself? Thanks for any advise.
Just record the option. It must be signed and dated by the Seller and it must be notarized as to his signature. Then just record it. Be sure to have a return address to you on the face of the instrument. Stop that is it.
Lucius 8-)
An Option Agreement would not be recored for two reasons: (a) Generally, there is no Notary Public present at the signing. That's easy enough to rectify. (b) There's great reluctance to put on public display all the terms and conditions of the option agreement.
You can always record a Memorandum of Option Agreement. In some parts of the country, you can record a Memorandum of Interest in Real Estate.
I personally, don't do either. I take an option. If I'm "back doored" by the owner--so be it, and on to the next transaction. There's too much out there to waste my time clouding title (maybe slandering title) and litigating for specific performance.
Parenthetically, my own lease option agreements specifically prohibit any recorded reference to the Option. That act in itself terminates the lease and voids the option agreement.
I write a very simple recordable option. I do have it notarized at moment of signing and the only slander of a title is committed by me and thats the way I like it.
A person in deep trouble is capable of almost anything and reselling a property is very common. In times gone by when I took deed, I would run for the Hall of Records just to record first cause first is where it is at in any problem in title. It makes all the other Grant Deeds moot.
Given my druthers I would always prefer just to take a deed and record it. I of course always have them fill out and execute a Statement of Identity so that the Title company has an easy way to go and has information on all parties.
Cheers Lucius
The Statement of Identity, filed along with Option?
Quote:
Parenthetically, my own lease option agreements specifically prohibit any recorded reference to the Option. That act in itself terminates the lease and voids the option agreement.
Cloudy memory here so check locally...
I believe that one or more states prevent such wording. The assumption is an option agreement for real estate is not a legal contract unless it is recorded. The rule says all contract for real property have to be recorded to protect the parties.
Check with a lawyer that practices in the state where the subject property is located.
BTW - I agree with the point that you should be prepared to move on to the next deal rather than legally fight. Protect yourself but do not lose the focus on the larger pictture.
John
Thanks guys. It is a very good point. Protection is good but finding deal is the key.
This legally fight issue with clouding the title has got me confused.
If a seller tries to back door you and sell to higher price to someone else, and you have justifiably clouded title because you have an agreement, why do you have to do anything but have the seller's attorney call you and let you know the cloud needs to be removed, and then you tell them how much that will cost them? Now, granted with an option there is an expiration date, so I am unsure what happens if seller simply waits until option expires - perhaps the cloud has no power then, or perhaps that is determined by whether the option was exclusive or nonexclusive.
I am open to learning that I misunderstand something, but on more than one occasion have I Heard of investors successfully clouding titles on fishy sellers, and getting BIG BUCKS for de-clouding.
Everyone,
My question, why do anything? if the seller sells the property that doesn't void your option unless he specifically addressed it in the contract ,in which case why would anyone consumate a transaction like that?
It seems to me one would just keep on keepin on and excercise ones option per the contract. correct me if I'm in error
If your option is not recorded then the second buyer probably gets to retain title since you failed to make your position public record. You may have recouse against the seller for fraud but one must always assume that sellers are judgement proof.
So I have sued to enforce an option. Big industrial building which I took over with a management contract with an option to buy. Seller tried to cancel the contract and the option but it was well written and not clear that the option ran with the contract.After some months of negotiations (which consisted mosly of me being insulted at their low offers and walking out of meetings) we ended up settling for $250,000 if i were'nt almost broke at the time I'd have got twice that..
Record the option or a memorandum. Cost something like a $15 filing fee. Cheap insurance