Hi, I'm about to do a seller financing deal and would like to know what specific documents we file with the county. Do we file the Contract for Deed with the county and for extra documentation also file the Land Contract Memorandum? Or would filing just the Contract for Deed be sufficient? Thanks!
Disclaimer: I'm not an attorney. Don't listen to anything I'm saying here until you've talked to an attorney about your specific situation.
In my experience, there are a few ways to handle this...
Option 1: You can get both a Land Contract signed AND a Land Contract Memorandum signed and notarized. You keep the full Land Contract document (which spells out ALL the terms of the deal) in your file, and you record only the Land Contact Memorandum, which is an abbreviated version of the full Land Contact. The LCM serves to notify anyone who does a title search on the property that YOU are still the current owner, but the property is in the process of being sold to a new person. This protects both you and the buyer, because you can't sell it to anyone else behind their back, and they also can't sell it or get a loan on the property behind your back... because anyone who does a title search on the property will see what's going on.
Option 2: You can skip the Land Contract Memorandum and just get the FULL, original Land Contract signed, notarized and recorded at the county. This will effectively do the same thing as the Land Contract Memorandum, but it will also include all of the specific details of the deal (the price, terms, etc). Since it's not necessary to record all of this stuff and make it public record, this is why most people will use a Land Contract Memorandum for this purpose instead.
Option 3: You can simply not record anything with the county and keep all the documents in your files (and your buyer will need copies of all the documents too). In a sense, this will keep the title clear and sort of make it cleaner if the buyer ever stops paying you (because there won't be any clouds on title from the Land Contract Memorandum that you have to get rid of). However, even if nothing is recorded, as long as the buyer has a signed copy of the Land Contract (which they're supposed to have) and proof that they've paid you, they technically have an equitable interest in the property UNTIL you've gone through the proper steps to terminate the Land Contract, however that process looks in your state (sometimes it's fairly simple, other times it's a big hassle that requires a court procedure).
In most cases, a defaulting borrower won't come after you when they know they've defaulted... but even so, they can technically claim they have an equitable interest in the property at any point in the future UNLESS you've terminated it properly. If you're going to do a lot of these seller financed deals, it's best to make sure you're terminating the land contract the right way if/whenever a borrower defaults, however that process looks in your state (don't just assume you can re-sell the property if the LCM hasn't been recorded... make sure you're doing it properly).