A "payoff deed" is used when a seller and buyer contract for a real estate sale through an "agreement of sale." If the buyer of the property stops making payments on the property they were purchasing, an agreement of sale allows the seller to foreclose the property in a certain time period. Therefore, an agreement of sale allows a seller who receives a low down payment to more quickly access the foreclosed property. A payoff deed is used to release a deed to the buyer upon full or partial payment made on a property. It is generally a faster procedure than a mortgage foreclosure.
The following is an example of a state law dealing with payoff deeds:
"33-750. Conveyance by seller; payment in full; payoff deed
A. A seller who is entitled to payment and who receives full payment of all monies due under the contract shall deliver to the person who made full payment a payoff deed that conveys to the purchaser the real property described in the contract. The deed shall be entitled "payoff deed", shall state that it is being delivered to consummate a contract and shall include the docket and page number or recording number of the contract.
B. For a contract that provides for a purchase price obligation of five hundred thousand dollars or less exclusive of interest, if a seller does not deliver a payoff deed pursuant to subsection A within sixty days of payment in full of all monies due under the contract, a title insurer as defined in section 20-1562 may prepare, execute and record a payoff deed. At least thirty days before issuing and recording a payoff deed pursuant to this subsection, the title insurer shall mail notice of its intention to record the payoff deed and a copy of the payoff deed by certified mail with postage prepaid and return receipt requested to all of the following:
- The seller of record and the seller's respective successors in interest of record at their last known addresses shown of record.
- The account servicing agent if known.
- Any person who received payment in full of the monies due under the contract according to the records of the title insurer at the address shown in the title insurer's records.
C. The payoff deed prescribed by subsection B of this section shall set forth all of the following:
- The name of the original seller and the seller's successors in interest of record.
- The name of the original account servicing agent and the successors in interest of the account servicing agent if of record or if known to the title insurer.
- The name of the original purchaser and any successors in interest of record of that purchaser.
- The date of recording and docket and page number or recording number of the contract.
- The date and amount of payment.
- A statement that the title insurer has actual knowledge that the monies due under the contract have been paid in full.
D. The title insurer or a duly appointed attorney-in-fact of the title insurer shall execute the payoff deed. Any delegation pursuant to this subsection does not relieve the title insurer from any liability pursuant to this section.
E. A payoff deed issued pursuant to subsection B of this section is entitled to recordation and, when recorded, constitutes a payoff deed issued pursuant to subsection A of this section.
F. In addition to any other remedy provided by law, a title insurer preparing or recording the payoff deed pursuant to subsection B of this section is liable to any party for actual damage, including attorney fees, that any person may sustain by reason of the issuance and recording of the payoff deed.
G. The title insurer shall not record a payoff deed if the title insurer receives notice before the expiration of the thirty day period prescribed by subsection B of this section from the seller or account servicing agent that the monies due under the contract have not been paid in full.
H. The title insurer may charge a reasonable fee to the owner of the land or any other person who requests a payoff deed including a fee for performing a title search, document preparation and mailing services and in addition may collect recording or other official fees."