Memorandum of Contract: How a Buyer Can Put a "Cloud" on Your Title

What it is

A memorandum of contract is a recorded public notice that a purchase contract exists. Some investor contracts allow “an affidavit or other memorandum of the contract” to be recorded, and either one puts the buyer's claim in the land records.^[1] The exact rules vary by state.

Why some investors record one

Recording tells the world the investor claims an interest in your home, which protects their position if you try to sell to someone else.^[1] Legitimate buyers sometimes use it. It becomes a problem when the buyer can't or won't close.

How it can trap a seller

• A contract clause allowing a memorandum or affidavit to be recorded can cloud your title.^[1]
• You may not be able to sell to anyone else until the claim is cleared, which can take months of litigation or push you to accept a lower price.^[1]

How it gets removed

The practical routes are a recorded release signed by the person who filed it, or a court order, often through a quiet-title action.^[1] In Connecticut, the owner can also record an affidavit of facts, which voids a recorded wholesale contract or notice.^[2] If a buyer refuses to release a memorandum after a deal falls through, talk to a real estate attorney.

Some states, including Connecticut, Oklahoma, and Louisiana, now ban wholesalers from recording anything against your title or otherwise clouding it.^[2][3][4]

Before you sign

1. Search the contract for “memorandum,” “affidavit,” “record,” or “equitable interest.”
2. Ask for that clause to be removed, or require the buyer to sign a release that the title company holds in case the deal ends.
3. Combine it with the other warning signs: a tiny deposit, a contract that lets the buyer assign, and no proof of funds.^[1] See assignment of contract.