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What is a Memorandum?
1. What Is a Memorandum?
A memorandum in real estate is a powerful legal document you can use to protect your deals. It's filed in public records and serves as a public declaration that an agreement or interest in a property exists.
Think of it as a safeguard. Once filed, it acts as a red flag to anyone searching the property's title. It lets everyone know that the seller can't simply sell or transfer the property to someone else without first addressing your existing agreement. This is a crucial tool for wholesalers, as it puts a public record on your deal and prevents the seller from double-dealing.
Key Elements of a Memorandum
Names of the Parties
Clearly identify both the buyer(s) and the seller(s) involved in the transaction. This establishes who is bound by the agreement.
Date of the Agreement
The date the contract was signed. This is a critical timestamp that establishes when your interest in the property began.
Property Description
A specific and unambiguous description of the property, typically its street address and legal description.
Signatures
The signatures of all parties to the contract, indicating their consent and legal commitment.
Notarization
The process of having a notary public verify the identities of the people signing the document. This step adds a layer of legal validity and authenticity.
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2. The Importance of Filing a Memorandum
While a signed purchase agreement creates a binding contract between you and the seller, a memorandum of agreement takes it a step further by making that interest public. Here’s why this is an essential part of your process:
Importance of Filing a Memorandum
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1. Preventing Poaching
The speaker emphasizes that once a seller has signed a contract with you, they are legally bound to that agreement. However, many sellers will still entertain calls from other investors or real estate agents who might offer a higher price. This is a common, unethical practice in the industry. Filing a memorandum serves as a public declaration of your interest, placing a lien on the property. Any other investor or agent doing their due diligence will see this recorded document and know that an existing contract is in place. This discourages them from attempting to steal your deal.
2. Protecting Your Position
The speaker stresses that a memorandum is a mechanism to "put others on notice" that you have a vested interest in the property. It protects your position as the intended buyer, ensuring your best interests are secured. Without it, your contract is a private matter between you and the seller, leaving it vulnerable to outside interference.
3. Enforcing Your Contract
Should the seller attempt to sell the property to someone else, the memorandum provides a legal basis to challenge the sale. Since the document is filed with the county clerk's office, you can use it to prove your equitable interest and enforce your right to purchase the property as per your original contract. This legal mechanism prevents a seller from going behind your back.
1. Preventing Poaching
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The speaker emphasizes that once a seller has signed a contract with you, they are legally bound to that agreement. However, many sellers will still entertain calls from other investors or real estate agents who might offer a higher price. This is a common, unethical practice in the industry. Filing a memorandum serves as a public declaration of your interest, placing a lien on the property. Any other investor or agent doing their due diligence will see this recorded document and know that an existing contract is in place. This discourages them from attempting to steal your deal.
3. Best Practices for Filing a Memorandum
The speaker offers valuable advice on the practical aspects of filing a memorandum of agreement:
From signing memorandums to closing, every deal starts with Prexium leads. Secure more deals now 👉
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