Here is a question from one of my Clients about purchasing a house using a kitchen table closing. My quick answer … Beware!
Q: Hi Lou, I have a property under contract that I want to resell / flip as-is to a rehabber / renovator, but I may have to purchase it quickly and simply record the Quit Claim Deed, without using a closing attorney or waiting for a title exam. I need your advice.
The seller just called me and left a message on my voice mail stating she did not want to sell to me because she received a better offer. Now I do have it under contract, with a signed purchase and sales agreement from her, and I had her sign a Quit Claim deed, too. I did that because she was fighting with her sister over ownership of this property, which was given to her by her mom who passed away 2 years ago. The deed is in her name alone, not the sister's, mom's or anyone else. I did see the deed and made a copy of it.
I thought I should get the Quit Claim Deed (QCD), just in case I needed to record it because of the family issues. The Seller agreed as well. She said she just wanted to get rid of this property. I also filed at the courthouse an Affidavit for the property showing I had it under contract, as you recommend. I'm in the process of getting a title check done by my title company.
Now what do you recommend I do? Should I go back to the courthouse and record the QCD or wait until the title search is complete to record the deed; or should I walk away, or should I choose to wait and schedule an attorney to do the closing?
Thank you, G.
A: Hi G., what you're describing is a little risky, yet it's done fairly often as is commonly referred to as a "kitchen table closing" since they are literally often closed right in the seller kitchen. It's a VERY good idea to get title exam run first, before doing a "kitchen table closing" especially if you are giving any money to the Seller.
Normally I wouldn't recommend 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 be sure that the transaction has been up front, and that you truly intend to move forward as you agreed. I think that I would go ahead and file / record the QCD. I don't see that you have anything to lose, and a lot to gain.
I would then inform the seller that she can not sell to anyone else because she already has a binding agreement to sell to you, and that you already "technically" own the house (since you recorded the QCD). Let her know that your plan is to review title, and as long as everything is in order, you'll proceed with a regular closing at which time she will receive any proceeds due her.
If there are any title issues preventing the sale of the house, then you will simply deed the property back to her after which she is free to sell to whomever she likes.
It was great that you already recorded your "Affidavit of Contract", putting yourself on record as having a valid Purchase & Sales Agreement (PSA). If the Seller attempts to sell to another buyer before you record the QCD, the Affidavit you recorded will protect your interests, and allow you to still purchase the house 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 will need to start making the payments on any loans (call the lenders to get a "statement of account" to make sure there are no surprise back payments or penalties you ' re "inheriting"). I'm assuming you gave her no / low equity / cash at this point, so you don't have any funds invested, or at risk with the seller. Now you've got time to evaluate all the financials and make an informed decision. If in the end, you do not want it, you can always Quit Claim the property back to the current owner, as you told her earlier.
** Note to all my fellow investors: you don't want to even play this "kitchen table closing" game, unless you have a strong indication that this is a good deal and you're 90% sure you're going to go all the way with this deal. Taking ownership via a quick recording of a QCD, and then bouncing ownership back to the original seller with another QCD later when you've "had a chance" to do your due diligence – is not a practice you should engage in regularly. We're only walking through it in this example, because the investor is trying to rush to protect his good deal from being "sold again" fraudulently, by the seller to another buyer.
You should always use a reputable attorney or title company to close your deals even when purchasing "subject to" the mortgage to ensure that there are no additional liens on that property of which you are not aware. By closing with a proper closing agent, you'll also be able to purchase title insurance to protect your investment in the property.
If a title issue arose with NO title insurance policy in place, you would be financially responsible for the cost to pay off any additional liens and / or all the legal fees to resolve the issue before you could re-sell the property. Unless you are willing to gamble with literally what may be tens or hundreds of thousands of dollars, close with a reputable closing agent and not attempt a kitchen table closing.