Purchasing a vehicle with an existing lien?

[Scout101]

Hey all,

Working through something, but thought I'd toss it out to the group for ideas:

I'm in the market for a motorcycle, so am checking out Craigslist and the like for what I want. I've found a nice one (a 2007 Honda Shadow) with low miles, and dressed out the way I want. In contacting the guy, I've found out that he still owes money on it (makes sense, if it's an 07 and he took a loan). that's all well and good, but that also means that the title has a lien on it, and he doesn't really own the bike at the moment.

Just for numbers' sake, he owes about $3500 on it out of an original $8k, and is asking around book (which is good, considering the cost of the extras he's installed).

Anyway, we're going round and round about how to do this without exposing myself to risk, just wanted to see if anyone else had had similar issues buying a bike, car, or other vehicle with a lien on it?

Happens all the time with trade-ins, but in a private sale, it's a lot riskier. I just don't want to give him money (even a deposit) without receiving a signed title back, because I wouldn't OWN the bike at that point. It'd be shaky because I'd at least receive a Bill of Sale, but he could technically also just keep my cash and report the bike stolen. Along those lines, if he didn't pay off the lien with the money i give him, I could be responsible for the loan when I try to register it...

To make it extra complicated, the loan isn't through a local bank or credit union, but Honda financial, so there' not a local branch to iron it all out in. He also says that paying it off himself to get the title, and then hoping I buy it, could be difficult for him (and it's believable, or he probably wouldn't be selling an almost-new bike in the first place)

Anyway, I wanted to lay out the framework for the deal that seems to be taking place, and wanted opinions if I'm doing the right thing, protecting myself enough, being unreasonable, etc.

-I'm going to go look at the bike, test-ride it, etc. It's a couple hour drive to get there, and sucks to not do this in one trip, but it is what it is

-He's asked for at least a deposit to be held (he suggested a local dealership, but since he knows them and I don't, i suggested ESCROW) so that he knows the bike will be sold if he pays it off for the title. I'd put an amount into Escrow as a 'good faith' deposit, releaseable upon final tranfer of the title to me.

-he then pays off the loan, gets the title, and I drive back.

-I pay for the remainder of the bike with a bank check, and get the bike, the title signed over to me, a Bill of Sale, and all that good stuff.

-When i get home, I mark the Escrow for release to him, and they give him the money.

SEEMS like it covers all of the bases, protects me, and gives him reasonable protection against paying off the bike and then being stuck with it and no money. Him not owning the bike outright is a pain in the ass, and you'd think he'd pay it off anyway to facilitate a quick sale, but if money's tight, not a lot he can do, I guess...

Thoughts?

 

[the 4th hanson bro]

I'd be surprised if you could get the title the same day he pays off the loan, especially since it's a national finance company.

What about escrowing the balance, you paying off the loan balance - he gives you the account number, when you receive the title and it's in good order release the escrow.

That way you know the existing note is paid off in full and you're not worrying about someone else doing something or not.

good luck

 

[Scout101]

No, it should take about 2 weeks to receive the cleared title once he pays it off.

I wasn't going to escrow the balance at all. Plan is to escrow the deposit, just as a signal that I intend to purchase the bike. He'll then pay it all off using his own money, based upon the deposit meaning that I'll pay off the rest. When he receives the title, I'd show up and give him a certified check for the remainder, plus release the escrow deposit, so he'd get the full amount all at once, but not until he has the title in hand.

That would prove he's paid it off and owns the bike, but doesn't give him any of my money until that point. I don't want to get into a situation where I'm paying off his loan myself, as there's (apparently) no easy way to do that, and no guarantee that the title arrives in MY name when it's finished.

I THINK that the way i mentioned is the least-risky way i can do this, as it means I'm not paying for the bike OR giving him a deposit until I see that he has the title in hand, with the loan paid off...

A pain in the ass, to be sure. Part of the risk in trying to buy an almost-new vehicle off of someone that can't make the payments, i guess. Claims it's had all the maintainence, and has paperwork of that, very low miles, etc. just wants to stop paying for something he doesn't use enough, and mentioned wanting to buy a bigger home farther north...

 

[the 4th hanson bro]

I took it to mean that he wasn't able to pay it off and needed to sell the bike to pay it off.

 

[Scout101]

My understanding is that he CAN pay it off if he has to, but he can't afford to pay it off if there's no reasonable expectation of receiving the cash from selling it in short order...

 

[Holdfast]

Isn't the simplest way to do this, just to escrow the entire amount you are willing to pay him for the bike (to show you intend to complete the deal), but only release funds once he gets the title back and then signs it over to you?

 

[CaptJimboJones]

What do you want a motorcycle for?

Those things will kill you.

 

[the 4th hanson bro]

Isn't the simplest way to do this, just to escrow the entire amount you are willing to pay him for the bike (to show you intend to complete the deal), but only release funds once he gets the title back and then signs it over to you?

And we have a winner.

 

[Holdfast]

Isn't the simplest way to do this, just to escrow the entire amount you are willing to pay him for the bike (to show you intend to complete the deal), but only release funds once he gets the title back and then signs it over to you?

And we have a winner.

Well, it's not really rocket science. Same thing happens (effectively) whenever you move home and there's a "chain" of house purchases you're dependent on. All the money all the way down the line is escrowed and the mortgage companies and lawyers release funds only as the contracts close as they work their way up the chain.

 

[Lookingglassman]

I wouldnt do it. I worked with a guy who had a bike he was selling and was supposed to pay off the lien when the guy gave him the money. Well this guy instead paid off credit cards and the guy who bought the bike got screwed. Eventually it was all fixed, but I still thought it was messed up.

 

[Scout101]

Isn't the simplest way to do this, just to escrow the entire amount you are willing to pay him for the bike (to show you intend to complete the deal), but only release funds once he gets the title back and then signs it over to you?

Yes and no. Probably in the long run, but neither of us has used Escrow outside of the sheltered situations where your lawyers and realtor handle it for home purchases, so there's that. Plus, he seemed kinda questionable about Escrow (he was afraid there was a way that I could deny the release of the payment, so he ended up without the bike and fighting for the money. I explained that he should put it in the bill of sale, and have us both sign it as part of the normal sale. If I denied the payment, he'd have the signed document that completed the sale, so I wouldn't have a leg to stand on, but still...

By only having a small deposit there, it means he'd have more of the cash in his hand, and only be arguing about a smaller amount if things took an odd turn for some reason. It also makes it easier for me, just insofar that I'm not putting the bulk of the money anywhere until I see him holding a clean title, a bill of sale, and a bike in the condition agreed upon.

What do you want a motorcycle for?

Those things will kill you.

They're fun? Gotta die of something, after all. I always wear a helmet, though, so I can have an open casket funeral at the very least. Wouldn't want to deprive people of one last chance to see my pretty face, after all

I wouldnt do it. I worked with a guy who had a bike he was selling and was supposed to pay off the lien when the guy gave him the money. Well this guy instead paid off credit cards and the guy who bought the bike got screwed. Eventually it was all fixed, but I still thought it was messed up.

That's why I've suggested doing it the way I have. I'm just putting a "good faith" deposit in Escrow (instead of his plan, where i leave it with the Honda dealer near him, who is a buddy of his), and then he has to use HIS money to pay the loan off in full. He doesn't get the escrowed amount, or the majority of the payment in cash or bank check, until he produces a clean title without a lien on it.

This is definitely a messed up situation, and neither of us has any experience with it, but it seems like I've outlined something that protects me as much as possible, anyway.

Only other way this sale is going to work is if he pays it off based upon a verbal agreement, and then trusts me to complete the sale once the paperwork arrives so that he's not paying it off with money he can't afford to miss. Riskier for him, but there's no way I'm giving him any money (as payment or deposit) until he shows me a clean title, because at that point, he's selling me someone else's property, and I can find any number of horror stories online about that...