Use a Memorandum of Agreement to Protect Your Deal
By Pierre Mouchette | Bits-n-Pieces
A memorandum of agreement is a legal affidavit that states that you have a deal with the owner to sell their property. When properly notarized, this affidavit may be recorded on the land records. This agreement can be beneficial if you want to prevent the Seller from going around you and selling to another investor while they have an agreement with you.
When you record the memorandum, it creates a 'cloud on title,' making it difficult for a buyer to insure the title since it creates uncertainty about ownership interests in the property. A title company/settlement attorney trying to perform a closing for the property would need to cure the defect by obtaining a quit claim deed from the Affiant to clear the cloud.
A memorandum of agreement may help protect your profit by allowing you to:
You should only use a memorandum of agreement if you are worried the Seller may enter into a purchase agreement with another investor.