Agreements for Deed in the State of GAPosted on March 29, 2011 by
A lot of investors have come to me asking about agreement for deeds. Apparently they have been to seminars or heard from fellow investors that they are a great way to transfer property while still holding title. In Florida, this is certainly the case. Florida Courts specifically recognize Agreements for Deed and has legal procedures that make the use of that document smooth. In addition, Florida is a Judicial Foreclosure state and Agreements for Deed allow you to avoid the lengthy foreclosure process in Florida and simply evict the prospective owners for non-payment just as you would evict a tenant here in Georgia. However, here in Georgia, such documents are not given official legal recognition and we have a Non-Judicial Foreclosure process. These two reasons make Agreements for Deed impractical in our state.
The big legal case on Agreements for Deed is Chilvis v. Tumlin Woods Realty from back in 1982. The court ruled that an Agreement for Deed would be treated for all intents and purposes like a Security Deed. The problem is that in this case no one really gets what they want. The buyer does not have any sort of real recorded title to the deed. They cannot sell the property or refinance. The seller does not have a lease, so they cannot evict the buyer in the case of non-payment. The agreement for deed also does not have any non-judicial foreclosure language so a quick foreclosure is out of the question. The only option to the seller in the case of non-payment is to go through judicial foreclosure. This process will take months and cost literally thousands of dollars. Worse, because Agreements for Deed are not commonly recognized in our state, a judge may be unwilling to allow the foreclosure without significant evidentiary hearings.
There are two ways to do what an investor in Florida does with an Agreement for Deed here in Georgia. If the investor wants to be certain to keep title, then they should do a lease-purchase. For a nominal fee, my firm, or another law firm familiar with the documents, could set up a lease agreement and a separate purchase agreement that will allow the investor to evict the prospective buyer as if they were a tenant, while at the same time crediting the prospective buyer with any credit towards down payment as part of their rent. If the borrower insists on being on title, owner financing is the way to go. A properly recorded security deed will allow for non-judicial foreclosure which takes about 2 months rather than the time of a judicial foreclosure. And it will cost a fraction of the judicial foreclosure route. Also it is often easier for a person to refinance an owner finance than qualify for a purchase money mortgage, making it more likely that an investor will realize the full amount they wish to sell the property for.
As usual, ask any group of lawyers any question and you will get a number of opinions, but here are some answers given to me when I brought up the issue in my Real Estate Attorney Mailing List: “Don’t Do Agreements for Deed!!!!!! Unless you enjoy trouble and complications and dealing with files long after they have closed.” – Bryan Wyndam, esq. “Just take a sharp stick and poke yourself in the eye. Repeatedly.” – Stephen A. Harlan, esq. “After doing one of these, I would rather take a blowtorch to my big toe than do another.” – Bill Porter, esq. “Hey, agreements for deed are good for my litigation practice. Don’t knock ’em!” –Richard Amblek, esq. (An attorney who makes his money filing lawsuits when closings go bad). There were no attorneys willing to stand up for the practice.