Real Estate

Real Estate Investing – Don’t Just GET THE DEED – The Infamous "Close up of kitchen table"

Here is a question from one of my clients about buying a home with a kitchen table closure. My quick answer… Watch out!

Q: Hi Lou, I have a property under contract that I want to resell/trade as is to a rehabber/renovator, but I may have to buy it quickly and just file the quitclaim deed, without using a closing attorney or waiting. for a title exam. I need your advice.

The seller just called me and left me a message on voice mail saying he didn’t want to sell me because he got a better offer. I now have it under contract, with a purchase and sale agreement signed by her, and I also had her sign a quitclaim deed. I did it because she was fighting with her sister over the ownership of this property, which was given to her by her mother, who passed away 2 years ago. The deed is only in his name, not to the sister, mother or anyone else. I saw the deed and made a copy of it.

I thought I should get the Quit Claim Deed (QCD), in case I had to register it due to family issues. The seller also agreed. She said she just wanted to get rid of this property. I also filed with the court an Affidavit of the property showing that I had it under contract, as you recommend. I am in the process of having my title company do a title check.

Now what do you recommend I do? Should I go back to the courthouse and file the QCD or wait until the title search is complete to file the deed? or should I walk away, or should I choose to wait and schedule an attorney to do the closing?

thanks, g

A: Hi G., what you are describing is a bit risky however it is done quite frequently which is commonly referred to as “kitchen table closing” as they often literally close on the Seller’s kitchen. It’s a VERY good idea to do a title exam first, before doing a “kitchen table closing,” especially if you’re giving the seller money.

Normally I wouldn’t recommend that you do your own closing, but since you’re rushing your purchase so you can “preserve” your deal before the other Buyer moves in and buys it, and/or before the sister does anything rash… Just make sure the transaction was upfront and that you really intend to go ahead as agreed. I think I would go ahead and archive/log the QCD. I don’t see that you have nothing to lose, and everything to gain.

You would then inform the seller that they cannot sell to anyone else because they already have a binding agreement to sell to you and that you already “technically” own the home (since you registered the QCD). Let her know that your plan is to review the title and as long as everything is in order, you will proceed with a regular closing where she will receive any proceeds due to her.

If there are any issues with the title that prevent the sale of the house, he will simply return the property to her, after which she can sell it to whoever she wants.

It was great that you have already filed your “Affidavit of Contract” which means you have a valid Purchase and Sale Agreement (PSA). If the seller tries to sell to another buyer before you file the QCD, the affidavit you filed will protect your interests and allow you to purchase the home in the future.

By filing the QCD, you become the official owner of the property. No one can take the deal away from you. Since you’re buying it “subject to” any loans, you’ll need to start making payments on any loans (call lenders for a “statement” to make sure there aren’t any surprise late payments or penalties you’ re “inherit”). I assume that you did not give him/little capital/cash at this time, so you have no funds invested, or at risk with the seller. Now you have time to evaluate all the finances and make an informed decision. If you don’t want it in the end, you can always stop claiming the property back to the current owner, as told you above.

**Note to all my fellow investors: You don’t even want to play this “close the kitchen table” game unless you have a strong indication that it’s a good deal and you’re 90% sure you’re going to go. all the way with this deal. Taking the property via a quick QCD recording and then returning the property to the original seller with another QCD later when you have “had a chance” to do your due diligence is not a practice you should engage in on a regular basis. We only discuss it in this example, because the investor is trying to rush to protect their good deal so that the seller doesn’t fraudulently “sell it back” to another buyer.

You should always use a reputable attorney or title company to close your deals, even when buying “subject to” the mortgage to make sure there aren’t any additional liens on that property that you’re not aware of. By closing with the right closing agent, you will also be able to purchase title insurance to protect your investment in the property.

If a title problem arose without a current title insurance policy, you would be financially responsible for the cost of paying any additional liens and/or all legal fees to resolve the problem before you can resell the property. Unless you’re willing to literally gamble with what can be tens or hundreds of thousands of dollars, close with a reputable closing agent and don’t attempt a kitchen table closing.

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