Why a Signed Warranty or Grant Deed Is Better Than a Performance Mortgage

Some investors advocate using a performance mortgage or deed of trust to secure the performance of an optionor under a real estate option agreement. However, I do not recommend using a performance mortgage or deed of trust for the following two reasons:

1. Most property owners will refuse to sign a performance mortgage or deed of trust.

2. Foreclosing on a performance mortgage or deed of trust can be very time consuming and costly.

As far as I am concerned, an optionee has no better security than a warranty or grant deed that is being held in escrow by a reputable third party and bears the witnessed and notarized signature of the optionor as grantor. Once the optionor signs a warranty or grant deed as the grantor, there is no legal way that he or she can default on the real estate option agreement later on by refusing to sell the property under option.

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