buying a car from an individual with my bank in another state, protecting him and me

November 26, 2007 9:37 AM

How do I be fair to myself and the guy whose car I'm buying, when the actual title transaction will be taking place mostly between banks in another state? Contract/time of delivery/protecting of interests question.

background

I'm in the process of buying a 2007 Mazda3 from a nice guy who determined that he couldn't afford the payments. I've had it inspected by a mechanic, it's apparently great. I told him that I could be laid back about when I actually got the car since he still needs to find an inexpensive used car for himself. In exchange, he's going to have it detailed/cleaned for me. It's got around 6000 miles on it, and is probably racking up more, but I've decided not to worry about that.

The total price I'm paying is less than he owes to the Mazda [something] financing co. -- he purchased the car in June and "owns" very little of it. I'm taking a loan out for about 60% of my price from my credit union, which is in GA (I'm in NC). The rest will be sent to the credit union in the form of a cashier's check made out to Mazda [something] financing co.


status

I'm working with my credit union, who has sent a power of attorney form for him to sign that basically says "your credit union lawyer can take care of the title". The credit union requires that POA or the one from NC; I think the POA situation is under control. They also have asked for various bits of legal information, contact info for the Mazda financing co., exact spelling of his name on the title, etc.

How to I make sure that the ownership, and drivership, of the car takes place at a time that protects us both? Should he hand over the keys just based on my word that I'm going to mail stuff to the credit union? Should I let him keep the keys even after sending the stuff to the credit union, until I get a phone call from them saying that the transaction is complete (how inconvenient)? How does this work?


what I'm trying to prevent

What if he wrecks, or otherwise damages, the car between the time the credit union sets up the ownership/loan and the time I get the car? What if he sets up the paperwork, gives me the keys, and then somehow the paperwork gets lost in the mail? What about things that could happen during this time now, between our verbal agreement and any contract/exchange of funds?


wrap up

I did a quick search of the web and even the local library, but example contracts I found were, as far as I could tell, not right for this situation.

I'm thinking we might make some kind of written understanding between us would help, or parking the car somewhere neutral until the transaction is officially complete.

Has anyone done a transaction like this before? What steps make sense?

I'd be willing to hire a lawyer for an hour or so, but am hoping it won't be necessary. On the whole, the seller and I trust each other, but I'm older and feel a responsibility to protect his interests as well.

Also: Should I insist that he provide an actual title, even if it's not in his name? Would he have access to this document? Or will the bank people handle this entirely?

Thanks in advance for any "Not a Lawyer/Not Your Lawyer" advice.

posted by amtho to law & government (8 comments total)

Okay, wow, complex. There are far too many questions here to actually answer them all, so I'm just going to tell you how my purchase went (my bank is in FL, the car was purchased in GA).

- First, we agreed on a price.
- The previous owner paid off his loan until he owed the amount I was to pay, and gave me the phone number of the bank which held the lein along with his account number and the VIN.
- My CU called his bank and got whatever information they needed to know in order to be able to draft a check.
We signed a bill of sale and a power of attorney granting me power to reassign his title (NOTARIZED!), and sent a copy of each to my CU.
- My CU cut a check to the previous owner's bank, and gave me 1) a photocopy of the draft, 2) a copy of a letter describing the nature of the draft ("Please pay the remaning balance on acct number XYZABC for car 1JMFC33... and send the title to Mr. Wazoo").
- I took these copies to the owner to prove that the car had been paid for, and got the keys.
[Engine fails here.]
- His bank sent me the title, I took that plus the original PoA to the local DMV, had the title reassigned to me, and purchased tags.

It's a complex process, but my CU is awesome and walked me through it without issue. HTH.
posted by TheNewWazoo at 10:24 AM on November 26, 2007

Oh, since you're financing part of the car, you'll have a lein on it. There will be a place on the title application for you to enter lein information. The DMV may send the title directly to your bank, or you may have to send it to them. The information you'll need to enter the lein on the title will probably be just the "Security Interest Holder's/Lein Holder's 12-digit customer ID" and the name and address of the lein holder (that is, your bank). Ideally, your bank should be providing you with an already completed title application, so you'll just need to waltz in with that (completed) form and the power of atty, and everything will just work.
posted by TheNewWazoo at 10:28 AM on November 26, 2007

I can't suggest a clear process, but one thing that concerns me is how the seller is going to pay off his loan if you're buying the car for less than he owes and he doesn't have extra cash to throw at it. If he doesn't pay off his loan then he can't sell you the car with a clear title. IOW, something in your process has to ensure that the only lien that remains on the title is the one from your credit union. My guess is that, to make this work, you'll have to make sure he pays off the difference between your purchase price and the amount he owes on the car BEFORE your transaction takes place. Obviously, IANAL.
posted by jon1270 at 10:32 AM on November 26, 2007

I also should add that once the bill of sale is signed, the car is yours. That means he will stop driving it, will remove the tags, and will surrender them to his DMV if he isn't going to transfer them to his new car.

IANAL
posted by TheNewWazoo at 10:39 AM on November 26, 2007

Thanks, jon - I just sent the seller a note asking if he was planning on paying the balance.

TheNewWazoo - great information. Did you actually borrow money from your credit union when you bought your car?

Also - did you write your own bill of sale?
posted by amtho at 10:55 AM on November 26, 2007

Yes, I finanaced 100% of the price, actually, but that doesn't matter. This may vary with your CU, but mine approved me for a certain amount, I needed somewhat less than that, I signed the paperwork, and then they put the amount I needed directly into my checking account. They then drafted the payment for the car directly from my account. If your bank behaves differently, I suspect that you'll just tell them how much to draw from your account, and they'll pull it out when they send the draft to the current owner's bank.

I did not write my own bill of sale - my CU provided one, but it's pretty boilerplate, and neither FL nor GA require anything special. "J. Doe at 123 Main St., phone number 312-555-1234, in consideration of payment of $e²j receipt of which is hereby acknowledged, does hereby transfer ownership to A. Mtho at 321 Niam Blvd, the following described automobile, a 2009 Ferrari Grand Cherokee, VIN 1JMFC33..."
posted by TheNewWazoo at 11:16 AM on November 26, 2007

Thanks a bunch -- I feel much more secure about all this now. Further information is still welcome, though.

I did find a standard bill of sale that I think will work for us.
posted by amtho at 11:26 AM on November 26, 2007

I sold my car in MI a few months back and I was in a somewhat similar situation as your seller. I didn't have enough money to pay off the total loan even with what the buyer was giving me. I had to come up with the balance because if the seller does not pay of his lien, he can't give you title. If he can't give you the title, that car ain't yours. Make sure he pays off the lien, or you'll be driving "his" car.
posted by m3thod4 at 11:09 PM on November 26, 2007