Land Contracts: That's Really Not How That Works

Land contracts can be a great way to purchase a property. They also have a lot of pitfalls and the opportunity for far more issues than a normal mortgage.

Got a call today that exemplified one major issue with them:  What happens if the seller dies before they deliver the deed to the property to the Buyer?

Well, to prevent that as part of the deal you should have the deed conveying the property to the buyer placed in escrow right when you sign the contract.

Of course, these folks didn't do that. 

So Seller dies.  Buyer has already paid off the land contract. Buyer would like a deed now.

Seller's next-of-kin apparently are fighting with each other and don't want to sign anything.

So Buyer's son calls me to ask what they can do.

Well, to fix it you can open a probate estate on the dead Seller and have the Court order the property be transferred to Buyer as the contract has been fully paid.

Of course, this takes time and money to do. Bit of a process but nothing too horrible.

Of course this fellow doesn't want to pay, so the good idea fairy has him ask me a question:

 "What if we just sign a deed with the Seller's name on it giving it to the Buyer, and file it, an no one will know any different because after all Seller is dead?"

NO, very much abso-bloody-lutely not. 

You see, I explain to him, what you plan to be doing happens to be called fraud and is a really dumb idea. Not only does it mess up title and create a bad deed, but it also exposes them to criminal charges for fraud.    

Idiot however thinks it's a great idea because they won't have to pay an attorney or open probate.  I again reiterate that not only is it really stupid, it's also illegal and he should not try that under any circumstances.

This is a great example of being penny-wise and pound-foolish, especially as the pounding they may get as a result of this stupidity may happen in jail.

I tell him again that the proper way to fix this is to open up probate and get it legally transferred. Anything short of that is going to cost them a lot more in the long run and they should not try to record a fraudulent deed.

So I'm not going to be retained to fix their problem, which is fixable.

 I expect these idiots to go ahead and create a much bigger problem for themselves to save a few bucks that is going to cost them a heckuva lot more to try and fix.