* ALWAYS insist on receiving a recorded deed…at time of purchase.
* ALWAYS insist on title insurance…at the time of purchase.
* ALWAYS be the one paying the property taxes…not the seller.
* ALWAYS pay the payments to a neutral party…not the seller.
Irving B. Joseph – Attorney
Johnson, Fort, Meissner & Joseph
As an Estate Lawyer I see this happen entirely too often. I prepare estate plans and administer decedent’s estates. As such, I am frequently involved in the assembly of an inventory of assets for individuals.
The biggest problem with purchasing assets without a deed is that there is no clear written evidence that a sale even took place. There is also a statute of frauds problem. The law requires that certain contracts must be in writing in order to be enforceable. The purchase of real property (land and buildings) is subject to the statute of frauds. It must be in writing in order to be enforceable. Without a deed, the buyer may not be able to enforce the purchase agreement. Further if the deed is not recorded, there is nothing that prevents the seller from selling the property out from under the buyer.
Many real property deals between friends are done with a handshake. That is all well and good until the seller dies and you are dealing with the seller’s heirs who know nothing of the transaction and refuse to be bound.
Not using a title company also creates many unforeseen problems as well. The main purpose of a title policy is to insure the seller actually owns the property. A second purpose is to insure that the buyer takes the property free and clear of all encumbrances. Many times there are encumbrances of which even the seller is unaware. Mechanics liens and tax liens are two such examples. The buyer may be taking the property subject to liens and encumbrances that substantially reduce the actual value of the property. The only way to safely purchase real property is to use recorded vesting deeds insured by a title company.
Nicholas Gradisar – Attorney
Gradisar, Trechter, Ripperger, Roth & Croshal
In many respects, the problems are too numerous to mention if buying real estate without a recorded deed and title insurance. Since the seller retains title, his creditors can reach the property so that purchasers may make payments and there is no property to convey at the end of the contract. Unless the deed is recorded, the buyer has not given notice that they have an interest in the property and other purchasers of the property may have a better claim to title. The cleanest way to convey the property is by a deed and promissory note secured by a deed of trust. The documents are recorded and everyone’s interest is protected.
Pam Spencer-Certified Escrow Officer
Klamath Falls, Oregon
During my 29 years experience in the title business and as an certified escrow officer we receive notices daily from our Title insurance underwriters advising us of fraud and scams in the industry. I would never buy real estate of any kind without reviewing a preliminary title report, depositing my money to escrow and receiving a title insurance policy after the deed was recorded. Buying property is a big investment, and unless the transaction is handled correctly, there can be serious problems for the buyer.
Every potential buyer should ask the following questions:
After paying a cash down payment to the seller, how does the buyer prove ownership interest in the property without a recorded deed? HE DOESN’T!
If the buyer makes payments directly to the seller without a collection escrow, what guarantee is there that a Deed will be provided upon payment in full? What happens if the seller dies or there is a dispute at the time of the payoff regarding how much is owed?
If the seller retains title to the property and is responsible for paying taxes, how can the buyer be sure that the taxes don’t become delinquent and the property foreclosed on by the county? The county would not be able to notify the buyer making payments on any delinquency without a recorded notice of ownership.
Edward Dower – President
American Eagle Wealth Advisors
I would never recommend that anyone buy real estate, anywhere, without receiving a recorded deed and a policy of title insurance. In my 20 plus years as an investment advisor I have never advised a client to do so, and I can’t imagine a single circumstance when it would be prudent. I have seen various problems with client’s estates where properties had title problems. In some cases the property could not be sold or given to the heirs without first going through costly and time consuming litigation to clear title.
Amerititle Account Servicing Supervisor
Klamath Falls, Oregon
I have worked in the title business for 19 years in the Collection Escrow Account Servicing Department. During this time, I have serviced hundreds of accounts for customers of Eli Property Company and Kerry Penn . A collection escrow account is extremely beneficial to both parties of a transaction.
Our company provides the following services for collection accounts Safe keeping of original documents until they are needed:
* All payments are processed accurately and according to instructions.
* A comprehensive annual statement itemizing every payment is provided.
* All required information regarding the account is sent to the IRS for you.
* We compile a paper trail of everything relating to your account.
Personally I would not purchase property without the services of a Collection Escrow Account. Many problems could arise without one, a dispute in the calculation of payments and payoff, location of the original documents, incorrect IRS reporting, and a lack of a recorded history of the account.
Eli Property Company, Inc.
I have seen my share of problems with people making mistakes when buying real estate. They usually buy property, very cheaply, with very low down payments, with no closing costs or title or recording fees. Sometimes people bid on the down payments over the internet . They think they are getting a “bargain” because the land is very cheap and they have little or no money invested intitially.
The problem is that most of the companies that sell property this way use “in-house” processing of the sale. You make your payments to the people selling the land. In most cases you don’t receive a recorded deed showing you even own the land until you have paid it off. Sometimes there are liens and other problems with the land that you don’t find out about until you have paid off the property.
When you bought your home you used a title company so everything was done properly. You make your payment on your home to a bank, mortgage company or title company collecting and servicing the loan. Buying property from a company that uses “in-house” processing is asking for major problems. Whenever you buy real estate insist on using a title company for the purchase and never make payments, or pay taxes, directly to the seller. If your taxes are not paid the county will foreclose on your land even though you are making the tax payments to the seller.
All these problems can, and should, be avoided by using a professional, neutral, title company for the purchase and insisting on receiving a recorded deed on your land. You should also insist that a bank or title company handles the collection of your payments. This guarantees that you are the recorded owner, you receive and pay the property taxes, and a professional company is handling the payments and crediting your account with each payment.
Please feel free to call 1-541-312-2959 or contact us if you have any additional questions.
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