Note Course Bonus - Part 2 Of When A Note Seller Backs Out
Published: Fri, 03/30/12
Hello ,
A few days ago I asked you,
"What can you do when a note seller backs out of your deal?"
and I sent part 1 of Lorelei Steven's advice on what to do.
Today is part 2. If you missed part 1, you can read it
at http://snipurl.com/22wakkb
Lorelei is President of Wall Street Brokers, a highly-respected
national note investment firm her father founded in 1971.
Cheers,
Bill
W. J. Mencarow
President, The Paper Source, Inc.
www.PaperSourceOnline.com
www.cashflows.org
http://store.PaperSourceOnline.com
P. S. Lorelei is the author of "LORELEI'S LEGAL LESSONS, THE
ESSENTIAL GUIDE FOR SUCCESSFUL NOTE BROKERS." She's taken her
decades of experience and revealed the little-known things
that can make or break you, written in a clear, concise and
easy to understand style. For more info or to download the
e-book right now, go to http://snipurl.com/legallessons
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WHAT CAN YOU DO WHEN A NOTE SELLER BACKS OUT?
Part 2
by Lorelei Stevens
RECORD YOUR AGREEMENT
Another approach is to record your agreement with the county
recorder. Your reason for doing this is that it may produce results
at some future time, but it is subject to so many perils that you
may decide it's not worth it.
Here's how it works: You write your preliminary agreement
including a clause in which the note seller authorizes you to
record the agreement in the county where the mortgage or deed
of trust is recorded. (The mortgage or deed of trust is the
document which is recorded against the real estate and is the
security for the note.) Then you record your agreement with
the county and let time pass.
Your agreement usually shows up on any title report in the
future. That can be a cloud on the title of the real estate.
A backed-out note seller then becomes eager to remove that cloud,
because a pending transaction usually hinges upon it. Then you
can convince the note seller to pay you an appropriate settlement
for you to release the agreement.
However, there are many possible ways for this plan to
backfire. First, the county recorder may refuse to record such
an unusual document as an agreement to sell a note. Second,
if the recorder agrees to record your agreement, it must contain
the legal description of the real estate securing the note, a
detail you must not forget. Finally, county recorders normally
only accept notarized documents, so you must get the preliminary
agreement notarized, and your note seller may not agree to do that.
Even if you get that far, the title insurance company may
decide that your recorded agreement is not a cloud on the title
of the real estate - as it has to do with real estate paper and
not the real estate itself - and issue title insurance anyway,
which defeats your whole purpose.
But the worst backfire comes if the note payor finds that your
recorded agreement is interfering with some transaction - buying
the note, selling the property, refinancing the property - and
becomes angered that you only obtained the permission to record
your agreement from the note seller and not from the note payor -
the owner of the property. You may face a lawsuit for slander of
title unless you release your agreement immediately and/or pay
damages to the note payor. That, of course, also defeats your
purpose and could put you in legal jeopardy with the note payor.
Even though recording your agreement may produce satisfactory
settlements in a few cases, the risks are generally not worth
taking.
HOLD HOSTAGE
There are two steps note buyers might think of, but must never
take: One is to refuse to return an original note to a backed-out
note seller on demand. If you haven't paid for it, you are holding
someone else's property hostage. Second is to obtain the seller's
notarized signature on an Assignment of Mortgage or Assignment of
Deed of Trust and record it before the transaction is complete.
This amounts to the same thing: you are holding someone else's
property hostage. You could face severe legal penalties for either
of these acts, which could be considered conversion. Conversion is
"any unauthorized act which deprives an owner of his property
permanently or for an indefinite time". This could get you into
serious trouble.
Having gone through the possible remedies for note sellers who back
out, you can see that there is no magic solution. Every possibility
has its drawbacks. Of course, there may be some circumstances in
which you would want to sue someone or force a settlement. The
experience will be interesting and expensive, and take up a lot of
your attention.
The wisest and most practical thing to do in most situations,
however, is to forget it and go on to the next deal. Put your
effort into the positive. You'll feel better and you'll do better.
COPYRIGHT 2012 WALL STREET BROKERS, INC. ALL RIGHTS RESERVED
Lorelei Stevens is president of Wall Street Brokers, a nationwide
note investment firm. Contact her at 206-448-1160. fax
206-448-1160, e-mail: lorelei.stevens@gmail.com
Website: www.wallstreetbrokers.com
Lorelei is the author of "LORELEI'S LEGAL LESSONS, THE ESSENTIAL
GUIDE FOR SUCCESSFUL NOTE BROKERS." She's taken her
decades of experience and revealed the little-known things
that can make or break you, written in a clear, concise and
easy to understand style. For more info or to download the
e-book right now, go to http://snipurl.com/legallessons
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