[WSBARP] Seller financed and transferring title prior to payoff...pitfalls?

[Mark Anderson]

Strange scenario - a real estate contract on the one hand AND a promissory note and deed of trust on the other hand.  Without knowing more specifics about any of these documents or repayment terms, here is my preliminary view on this.

Title may be transferred to the buyer by deed.  In that case, the promissory note would still be unsatisfied and payment under the promissory note would still be secured by the deed of trust.  I would only do this on the following conditions:

  *   the promissory note has payment provisions similar to those contained in the real estate contract;
  *   the promissory note is secured by the deed of trust on the real property that is also the subject of the real estate contract; and
  *   title is transferred to the buyer by way of a quitclaim deed, and not a statutory warranty fulfillment deed.

Now that I think about it, I wonder about the propriety and effectiveness of a deed of trust on property that the grantor does not yet own.  Hmm.  If there is any question about that, I would require a brand-new purchase money note and deed of trust to accompany the deed.

Mark B. Anderson
ANDERSON LAW FIRM PLLC
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Tacoma, Washington 98402
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From: wsbarp-bounces at lists.wsbarppt.com <wsbarp-bounces at lists.wsbarppt.com> On Behalf Of Timothy Lehr
Sent: Wednesday, January 21, 2026 8:23 AM
To: wsbarp at lists.wsbarppt.com
Subject: [WSBARP] Seller financed and transferring title prior to payoff...pitfalls?

All,

I have a PC seller that sold a property on a seller financed RE contract a number of years back. There's an executed promissory note and deed of trust. The RE contract contemplated a fulfillment deed to be recorded when the balance is paid by buyer. There is still a balance owed, but seller wants to assist buyer by transferring title now so buyer can apply for flood insurance. Insurance company is saying she can only apply if she is the title holder.

Any pitfalls, considerations, or problems if seller transfers title now and keeps receiving payments via the promissory note?

Thanks,

Timothy C. Lehr
Attorney & Partner

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