West Jordan, UT asked in Real Estate Law for Utah

Q: I am buying out my co-owner on a residential home for an agreed amount of $62,350.

Our agreement is he gets $50,000 now and signs a warranty deed and the balance of $12,350 after/when the house is sold in the very near future. Is it to my benefit to use a promissory note of a trust deed for the $12,350

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1 Lawyer Answer

Wesley Winsor

Answered
  • Saint George, UT
  • Licensed in Utah

A: Not sure I understand. He is signing the deed now? If so then, you would be giving him the promissory note for the remaining $12,350.

Trust deeds are secured by land, promissory notes do not inherently have any collateral attached to them. As you are the borrower in this case, it is best for you if you sign an unsecured promissory. This give you the least amount of liability.

If in a twist, he is not signing the deed now, but later and you are making him sign a trust deed in your favor, then the transaction would look like this:

You (loan/pay) him $50k in return he signs a promissory note backed by a trust deed on the property in your favor. That way if he fails to sign over the deed when you pay the remaining $12,350, then you can make him either pay back the $50k or you can foreclose on the property.

The transaction works best if you are borrower and you sign the promissory note for the remaining $12,350. That way it won't hold up any sale, you could do a personal guaranty if pressed, but it would better for you not to.

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