Question by Michelle Utter:
My mother purchased a house at an auction and took out a loan through a bank to pay for it. She then sold the property to us via Contract for Deed. We in turn sold the property to another woman via Contract for Deed. The Contracts for Deed both state that the contracts for deed be held by the seller (with the buyer holding a copy) and will be recorded only as necessary with the Warranty Deed being delivered to buyers only upon payment in full.
Someone else has now told us that without the contracts being recorded it makes both not worth the paper they are written on. We were under the impression that the contract gave us legal right to sell the property any way we wanted too. Does this mean that the second deed is void or that the woman should have deeded with my mother instead of us? Also, if both contracts are valid, can we sell the contracts to a finance company and be done with the whole mess of it?
Answer By William Bronchick:
A contract for deed is not "invalid" simply because it is not recorded. Recording does protect the buyer's interest in that is gives notice to the world that the contract exists. If not recorded, the titled owner may end up with liens against the property that will make it impossible for them to convey title. If the titled owner were unscrupulous (not in this case), he could deed the property to another person.
Disclaimer: The foregoing is not intended to be given as legal, financial or tax advice, but intended for instructional use only. If you require legal, financial or tax advice you should seek the assistance of a qualified professional.
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