Questions about legal jargon in contract?

[Halobear]

What is the name of your state? South Carolina

I have a question about something that is in our contract. The contract hasn't actually been signed yet, we just got it yesterday for review. I am trying to make heads or tails of some of the terms in it...I will put it here and hopefully someone can shed some light on it for me and my family.

"The Parties agree that this contract shall not be recorded. The Purchaser is aware that Seller may mortgage the property in the future and such mortgage will have priority over this Contract of Sale. The Purchaser and Seller agree this Contract of Sale shall not be recorded and have been informed that this may have adverse legal effects regarding recorded judgments, liens, mortgages, conveyances and other legal matters where this Contract would otherwise have legal priority over if this instrument were recorded."

Does this mean that if the seller mortgages the property we may lose it? Is there any way, since nothing has been signed yet, that we can have this taken out? My family and I have talked this over and would prefer that no one be able to mortgage the property at all.

 

[Souix]

What is the name of your state? South Carolina

I have a question about something that is in our contract. The contract hasn't actually been signed yet, we just got it yesterday for review. I am trying to make heads or tails of some of the terms in it...I will put it here and hopefully someone can shed some light on it for me and my family.

"The Parties agree that this contract shall not be recorded. The Purchaser is aware that Seller may mortgage the property in the future and such mortgage will have priority over this Contract of Sale. The Purchaser and Seller agree this Contract of Sale shall not be recorded and have been informed that this may have adverse legal effects regarding recorded judgments, liens, mortgages, conveyances and other legal matters where this Contract would otherwise have legal priority over if this instrument were recorded."

Does this mean that if the seller mortgages the property we may lose it? Is there any way, since nothing has been signed yet, that we can have this taken out? My family and I have talked this over and would prefer that no one be able to mortgage the property at all.

**Yes, you could have the seller carry back a Note and Trust Deed instead of an Installment Contract. Ask your attorney to draw one up and change the language in the purchase agreement accordingly**

 

[JETX]

Is this an 'owner financed' deal??? If not, I see absolutely NO reason for you to agree to it. For example, the seller could get a civil judgment against them at some point in the future and guess what.... that property (not protected by homestead or exemption) will the FIRST thing that a creditor will grab.

Purchasing a house is one of (if not THE) largest financial transactions you will do in your life. Pay the few hundred dollars to have an attorney review the agreement and to advise you of your rights..... and limitations.

 

[Halobear]

It is in fact an owner financed deal...does this make a difference? We are buying the property "as is"...it is located next door to my husband's parents' home. It has a burned house on it, and we are planning to bring down the house and build there.

 

[JETX]

The facts noted in your subsequent post do not alter the fact that you need to get a local real estate attorney to review the agreement to protect you. If you don't, I can see 100 reasons why you could be here next year with some huge property problems.... asking for help.

 

[HomeGuru]

Writer, do not agree. Only agree if the contract is recorded and the Seller is restricted from using the property as collateral for any type of financing. And your attorney reviews the contract. There is probably a due on sale clause in the Seller's mortgage and the Seller wants to be able to mortgage the property after you purchase it and have the mortgage in first or next priority over your contract.
Agree to the terms that the Seller wants and you have a potential disaster waiting to happen.

 

[justpassingthru]

Many states have laws that require all land installment contracts be recorded. Yours may be one of them. Keeping your transaction "under the radar" is a perfect opportunity for the seller to screw you right out of your property. Recording land contracts is a protection for you. Without it your interest in the property is invisible. There could already be mortgages and tax liens against the property well in excess of your purchase price. A title search is going to be performed I hope? There should be no liens in excess of your purchase price. I smell a big fat rat. If you go through with this without having a good real estate attorney handling it for you I predict you will be verrrrrrrrry sorry.

 

[HomeGuru]

Many states have laws that require all land installment contracts be recorded.

**A: can you name just of the these "many" states that you say require recordation of a land installment contract?
****************

Keeping your transaction "under the radar" is a perfect opportunity for the seller to screw you right out of your property. Recording land contracts is a protection for you. Without it your interest in the property is invisible. There could already be mortgages and tax liens against the property well in excess of your purchase price. A title search is going to be performed I hope? There should be no liens in excess of your purchase price. I smell a big fat rat. If you go through with this without having a good real estate attorney handling it for you I predict you will be verrrrrrrrry sorry.

**A: I agree.

 

[justpassingthru]

**A: can you name just of the these "many" states that you say require recordation of a land installment contract?
****************

Give me a day and I will name all if you want but I do know of one off the top of my head...Ohio

 

[Halobear]

Thank you very much for the advice...I will take the contract to a lawyer tomorrow morning and have everything reviewed. I was confused on the terminology used in the contract and therefore was unclear to its meaning. We are first-time home/property buyers and are still very much in the dark on a lot of things.

 

[HomeGuru]

Good luck to you.

 

[Halobear]

Update on our Property

Just thought I would update you on the progress of our situation...

Monday, just to rule out anything that might have already been in place against the property, I went to check out the titles and everything. There were no liens, judgments, or mortgages on the property. The man that we are buying from is free and clear with the property, which eased my concerns somewhat. The next step was to talk to a real estate lawyer, who recommended the same things that you all did. Today I spoke with the seller, who has readily agreed to take out the "seller may mortgage" clause and have it revised to read that "neither seller nor buyer may mortgage" as we wished. He has also agreed to let us record the sale. So I am in a much more comfortable position now, and I do thank you for your advice. So all is moving along smoothly, and now all we are waiting for is the revised version of the contract to come back from the lawyers...

We're looking forward to our move, and thanks again!

 

[HomeGuru]

That's good news.

 

[buzzards27]

Ohio Revised Code

Ohio Revised Code 5313.02 Minimum contents of land installment contract; mortgage on land installment contract property; duty of vendor to record; formalities.

[snip]

(C) Within twenty days after a land installment contract has been signed by both the vendor and the vendee, the vendor shall cause a copy of the contract to be recorded as provided in section 5301.25 of the Revised Code and a copy of the contract to be delivered to the county auditor.

http://onlinedocs.andersonpublishing.com/oh/lpExt.dll?f=templates&fn=main-h.htm&cp=PORC

 

[buzzards27]

South Carolina Law

RECORDATION ESSENTIAL TO VALIDITY

SECTION 30-7-10. Conveyances, liens and other transactions valid as to subsequent purchasers and creditors without notice when recorded.
All deeds of conveyance of lands, tenements, or hereditaments, either in fee simple or for life, all deeds of trust or instruments in writing conveying estate, creating a trust in regard to the property, or charging or encumbering it, all mortgages or instruments in writing in the nature of a mortgage of any real property, all marriage settlements, or instruments in the nature of a settlement of a marriage, all leases or contracts in writing made between landlord and tenant for a longer period than twelve months, all statutory liens on buildings and lands for materials or labor furnished on them, all statutory liens on ships and vessels, all certificates of renunciation of dower, all contracts for the purchase and sale of real property, all assignments, satisfactions, releases, and contracts in the nature of subordinations, waivers, and extensions of landlords’ liens, laborers’ liens, sharecroppers’ liens, or other liens on real property created by law or by agreement of the parties and generally all instruments in writing conveying an interest in real estate required by law to be recorded in the office of the register of deeds or clerk of court in those counties where the office of the register of deeds has been abolished or in the office of the Secretary of State delivered or executed after July 31, 1934, except as otherwise provided by statute, are valid so as to affect the rights of subsequent creditors (whether lien creditors or simple contract creditors), or purchasers for valuable consideration without notice, only from the day and hour when they are recorded in the office of the register of deeds or clerk of court of the county in which the real property affected is situated. In the case of a subsequent purchaser of real estate, or in the case of a subsequent lien creditor on real estate for valuable consideration without notice, the instrument evidencing the subsequent conveyance or subsequent lien must be filed for record in order for its holder to claim under this section as a subsequent creditor or purchaser for value without notice, and the priority is determined by the time of filing for record.

http://www.lpitr.state.sc.us/code/t30c007.doc