Issues with Designating Seller as “Owner of Record”

Originally Published: 9/3/2012

One trend we have noticed recently is an increasing number of new purchase contracts with “Owner of Record” designated as the seller.  For several reasons, we do not encourage sellers’ agents to complete contracts with this designation, or for buyers to sign contracts without the full legal name of the seller listed.

The first problem with using this designation is that it may not be possible to ascertain the actual identity of the seller. This is particularly problematic with bank-owned (“REO”) properties where the property was acquired through foreclosure or a deed in lieu of foreclosure, because the true owner of the property may not be known due to multiple transfers or assignments of the underlying loan. In fact, many of the contracts we see which state “Owner of Record” as the seller are for the sale of  REO property, presumably because the identity of the owner is potentially at question.

Another dangerous situation in which we often encounter these type of contracts is a flipping scheme where the alleged seller does not yet own the property, but is under contract to purchase the property, and plans to immediately flip the property after closing.  In these situations, the alleged seller does not want the buyer to know that s/he does not actually own the property and intends to flip it to the buyer for an immediate profit. Clearly, a contract signed by a seller which does not actually own the property at the time of signing is invalid.

In addition, it is the opinion of many real estate attorneys that a contract with the “Owner of Record” seller designation is unenforceable as a matter of law because the true identity of the seller is not ascertainable.  After all, if the identity of the seller is not known and is simply designated in the contract as “Owner of Record” with an illegible signature,  who does the buyer sue if the seller breaches the contract or if a title issue arises after the sale?  For these reasons, more and more title insurance underwriters are rejecting contracts listing “Owner of Record” as the seller.

Therefore, we advise agents to avoid using a designation of any party in a contract which does not identify the full legal name of the party.  Further, if you come across any contract which identifies the seller as “Owner of Record,” we strongly recommend to have an attorney review the contract and determine the reason for such a designation, because in our experience, it is usually not a good one.

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