Worst Case Scenario

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June 2010- Download the PDF 

Scenario: A year ago, your client decided to enter into a land contract with a buyer, as it seemed that that was the only way for them to sell their house. However your client, the Seller, has recently learned that the Contract Buyer has vacated the property and is no longer making the payments under the land contract. The Seller now wants you to list the property again, so they can sell it once and for all. You order a title commitment for the “new” listing, revealing the existence of the land contract as well as several judgments listed against the Contract Buyer. Sound familiar? Absolutely! Hopeless? Maybe not!

As you know, legal title in a land contract does not occur until its full payment and a subsequent deed is transferred to the Buyer. However, there is a possibility that the contract Buyer has obtained enough of the property’s equitable interest, whether through a large down payment or contract payments made thus far, such that the Seller will need to commence a foreclosure action against the contract Buyer. In most situations, the Buyer has not obtained significant equitable interest in the property. Under these circumstances, your situation is not hopeless.

Meridian Title will undergo a risk assessment with its underwriters to determine if the contract Buyer’s interest can be removed by way of an affidavit, given that the chances of obtaining a deed from the defaulting Buyer are few and far between. Meridian Title will also need to examine if a foreclosure will need to be commenced as to the judgment creditors of the defaulting Buyer. It may also be possible to insure over those judgments without a legal proceeding.

Although we would all prefer it did not happen, it is very possible that a buyer will default on a land contract. Therefore, it is important to encourage your clients to be prepared in the event that it does occur.

*The information contained in this flyer is intended for general informational purposes only and should not be construed as legal advice

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