I had a question for all of the brain power out there. If I buy a property either “subject to” or “lease with Option to Purchase”. How do I know that the seller won’t refinance the property and draw some sort of equity out of the property since the titile is technically in his name???
Am I taking more of a chance, I can see doing a title search to check for tax leins, balance owed etc, but do I have to put a clause in the purchase agreement? Get the Deed? Record it in such a way that it doesn’t trigger the “due on sale clause”?
I can’t seem to get any good info, hopefully if someone has done this successfully,I would like to know. I am worried that the seller may try to pull a fast one on doing a refinance on the property before I put a new first on it or spend any of my own money to repair and fix up…
Thank you real estate gods for all your answers in advance…
Please don’t call me god. That walking on water stunt I pulled at the beach was really just an optical illusion. . .
Anyway, as far as protecting your position when doing a lease option, it isn’t difficult at all. You can record a Memorandum of Option with the county where the property is located. This effectively clouds the title, so that if the homeowner tries to sell or even refi the property, that memo is going to show up and stop the process until the lender contacts you to find out just who you are and what your interest is in the property.
An even stronger document you can utilize is a Performance Mortgage, which also would be filed with the county. However, this one may be a bit more difficult to have a homeowner sign because it is a bit more imposing and many homeowners have been scared off by it.