How to Fill Out a Seller’s Memorandum

Some companies have used memoranda to lock up properties for extended periods without a legitimate intent to purchase. In one example, a company paid a small amount ($1,200) to a homeowner to sign a contract with a 40-year term. The memorandum was filed, and the company had the right to the property and any future equity. This type of predatory practice is illegal and unethical. Pro Tip: Only file a memorandum when you have a legitimate, well-documented, and executable contract. Your intention should be to close the deal, not to tie up the property indefinitely. Misusing this tool can lead to legal action, fines, and even criminal charges.

Before you even think about the memorandum, your original purchase agreement must be legally binding. This means it must include all essential elements of a contract, such as: Identified parties. A clear legal description of the property. The purchase price. Consideration: This is the most crucial part. You must have something of value exchanged. This is typically a small amount of earnest money deposit (EMD). Even $5 can be enough to make the contract legally binding in some jurisdictions. Without consideration, a savvy lawyer can argue the contract is a non-binding "option" and get the memorandum dismissed.

Once you have a signed, valid contract, you can proceed to file the memorandum with the county clerk's office. This is a public record, so it must be filled out accurately. The memorandum should reference the original purchase agreement. It must be signed by the parties to the contract. Most importantly, it remains in effect until it is officially released. You, as the buyer, are responsible for releasing the memorandum once the deal is closed or if the contract is terminated. The seller can't do this on their own.