How to protect my interest in a deal

Question

Hi Guys, could you please advise me on the following deal.

I had arranged a short sale on a 4plex from $500 000 to $192 000. The market value is around $250 000. I am using a friend of mines credit for FHA loan. We are going into closing in a week. Since this is my deal, What is the best way to protect my interest in the property. I want to make sure that my friend is not going to cheat me and sell the house.

Thank you

Michael Quarles · Answer

RECORDING REQUESTED BY

AND WHEN RECORDED MAIL TO
______________________________________________________________________SPACE ABOVE THIS LINE FOR RECORDER’S USE ONLY_____________

APN 
MEMORAMDUM OF PURCHASE AND SALES AGREEMENT
This is a Memorandum of that unrecorded Purchase and Sales Agreement ("Contract"), dated the th day of between  (hereinafter referred to as "Seller"), and  as  and not personally under the provisions of a trust agreement known as “,” (hereinafter referred to as "Buyer") concerning all the real property situated in the city of , County of , State of . Commonly known as and more specifically described in Exhibit "A" attached hereto and made a part hereof by reference, together with all tenements, hereditements and appurtenances thereunto belonging.
For and agreed sum and for good and valuable consideration of the covenants and agreements on the part of the Buyer, Seller has agreed to sell and convey to the Buyer and Buyer has agreed to buy, the Property upon the terms and conditions set forth in the Contract, which terms and conditions are incorporated in this Memorandum by this reference.
Except as provided in the Contract from the date hereof, Seller shall not have the right, with respect to the Property to enter into any new contracts, leases or agreements, oral or written, without the prior written consent of Buyer.
This Memorandum is not a complete summary of the Contract. Provisions of this Memorandum shall not be used in interpreting the Contract. In the event of conflict between this Memorandum and the Contract, the Contract shall control.
A Copy of the Contract may be obtained by contacting (Trustee), whose mailing address is , and whose telephone number is .
_____________________________________________ _____________________________________________
(Seller)	Date	                                 (Seller)	Date

____________________________________________
(Buyer)	Date

State of __________________________________
County of _________________________________
On _________________ before me, __________________________________, personally appeared __________________________________________________________, Who proved to me on the basis of satisfactory evidence to be the person(s) who’s name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s) or the entity upon behalf of which the person(s) acted, executed the instrument.

I certify under PENALTY OF PERJURY under the laws of the State
of California that the foregoing paragraph is true and correct.

WITNESS my hand and official seal.

Signature __________________________________

My Commission Expires ________________________			(This area for  official notarial seal)

John Smith · Answer

Long term 5+ years ..

Let me see if i can understand ..

We will need 2 docs:
1.contract between me and my friend, that says he will be selling me the property for let say the amount of the mortgage
2.recorder memorandum

Once i am ready to sell the property i find a buyer and do a double closing.
I want to make sure that no money will go to my friend. So let say 5 years from now. The mortgage is paid to 150 000. I am selling the property for 300 000, but our initial contract says 190 000 which is the price of the mortgage. This means that 40 000 goes to my friend. What i need to put in the contract? Thank you

Justin S. · Answer

John

The option memorandum prevents him from selling it to anyone but you.  As stated "Except as provided in the Contract from the date hereof, Seller shall not have the right, with respect to the Property to enter into any new contracts, leases or agreements, oral or written, without the prior written consent of Buyer. "

You would need to release the option before he can sell.  Are you doing a long term hold or short term flip on it?

John Smith · Answer

Thank you for you help guys. Sorry for the stupid question. But once this is recorded my friend won't be able to do anything with the property, but he is still the owner. What happens if i want to sell it for 300 000$ and there is a mortgage of 190 000$. The profit will go in my friends accounts...Please advise

Chris Martin · Answer

Of course this would be in a recorded format as in this random example. The wording along the lines of what Michael provided may be more appropriate than this example... this is just an example of how the others may use the recorded memorandum.

John Smith · Answer

Could you please be more specific. What this memorandum should say?

Thank you

Jeanine P. · Answer

hello John,

You could file a memorandum at your county clerks recorder's  office to cloud the title so he can't sell with out you. Once the loan goes through you could also immediately record a new deed with the both of you on the deed.