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Dealmakers: Have you ever had a sweet deal under contract to buy, only to have the seller suddenly decide for whatever reason not play ball with you anymore?
What can you do?!
At first, you’re their new best friend…
They ‘see the light’, and they’re more than happy to let you relieve them of their distressed property/situation for the reasonable price & terms you proposed and they warmly agreed to.
You’re heroically saving them from the ‘bad house’ situation they’ve somehow found themselves in.
Then, things suddenly go sideways…
A few days later, they suddenly want out and for no good reason.
- Maybe someone else came in behind you and made a slightly higher offer than yours. It happens – often shysters or noobs who don’t know their numbers and just want a deal but can’t really do it.
- Maybe they decide afterward that your car looked a little too nice, and you can probably do better than the contract price/terms they already agreed to.
- Or, maybe they just don’t like the way your hair looks or your politics on Facebook or that weird southern/northern accent you’ve got suddenly turns them off.
Whatever the reason, things can suddenly get weird and go sideways. It doesn’t happen often, but when a seller gets squirrelly and tries to cancel you for no good reason, what’s an investor gonna do?!
Enter: The Affidavit of Equitable Interest ⇊
For the record, let me be clear…
I’m NOT into always holding sellers ‘hostage’ to our agreements.
Life or circumstances really change sometimes. And when they do, maybe things are worth reconsidering sometimes.
If they’ve got a legit reason for having second thoughts, and are willing to have a thoughtful conversation with me to talk about them, then I’m always willing to listen, understand, and even back politely out of the contract we both previously agreed to.
Sure, I’m sad for a minute about the deal lost, but I understand.
But ya know, sometimes people just get WEIRD.
And for those now-and-then times when a seller suddenly gets squirrelly on you, and tries to cancel you for no good reason…
Well, that’s exactly when you’ll be super grateful that you’ve got this handy dandy “Affidavit of Equitable Interest” in your Awesome bag of tricks. ッ
And yes, I’ve got one for you. But first…
Here’s a quick story about using it…
An Affidavit of WHAT?!
This handy dandy little one pager protects your interests as the buyer. It’s a form you will only need in certain cases, but one you should always keep on hand.
And yes, I’m giving you mine. So, now you will. ッ
First, let’s just quickly clarify…
What the heck is “equitable interest”?
Equitable interest is what you (as the buyer) have ownership of during your contract period – from the time you both sign until you actually close.
It’s more specifically defined by precise contract terms explicitly agreed to when a purchase & sale agreement is activated for any piece of real property.
And — Snapple Fun Fact — this “equitable interest” you now have is technically considered personal property, and it’s what binds the seller to you and the terms of the contract. It’s actually this “equitable interest” that you’re selling when you wholesale a property via assignment.
That’s not really the point. Just a nerdy sidebar I guess.
Here’s the bottom line…
If you have a contract to purchase a property, and you’re not 100% sure the seller’s going to be loyal to the terms of your agreement, then you can protect your equitable interest by filing a document like this.
It basically gives public notice that you already have a signed agreement to purchase the property from the homeowner.
Doing so effectively “clouds” the property title, and makes it very difficult (if not impossible) for another buyer to get clear, insurable title. At least not without expense and hassle factor.
The “bad news” is that you have to get this doc notarized in most states in order to be “recordable” with your County.
But the “good news” is that you (as the buyer) are the only one who needs to sign it! Easy peasy.
So, it’s not something you use all the time. But if you think you have a squirrely seller who may not make good on their end of the deal, a simple doc like this in your ‘bag of tricks’ is a super useful tool you can deploy to protect your deal.
I’ve only ever done it twice, and one of those times it saved a deal.
Affidavit of Equitable Interest: Get Mine Now 🙂
First off, I’d like to ask a small favor:
Would you please “Like” our Facebook page if you haven’t done so already?
Doing this will most definitely make you awesomer and probably better looking, too.
Ready to just grab mine for your own Awesome bag of tricks?
Sweet, just remember: You might want to run it by a local Notary Public to make sure the notary verbiage is kosher for your area…
Just download the document here… No strings attached.
Oh, and BTW…
In case you didn’t know, we give stuff away like this all the time, like our ‘the way things work’ for landlords, transfer letter, assignment of contract, simple real estate contracts, an agreement for subcontractors, 47 MLS keywords for REI, and one of our favorite real estate investor postcards.
