Posted by Natalie-VA on June 08, 2008 at 09:55:14:
A Corporate Resolution is a document that shows that he has the authority to sign for the corporation. I really hope that you hire an attorney that represents only YOU to draw up these documents. Best wishes.
–Natalie
Anything wrong with this offer? - Posted by Sara_CA
Posted by Sara_CA on June 01, 2008 at 20:10:29:
I am selling a lot for $150,000. Found a buyer finally, but he wants to put $50K down, owner finance the rest as a Straight Note for 24 months. No payments during 24 months, but all due and payable at the end. He wants to build a house and re-finance to pay me off, and wants me to sub-ordinate to his construction loan to build his house. The construction loan company will not lend to him unless they are in the first position. I have never done a Straight Note in which I sub-ordinate to another loan before. Is there danger here?
What if!!! He is required to make payments to his construction loan every month, but fails. He is not required to make payments to me for 24 months, so he is not delinquent on the seller-financed loan. The construction loan company forecloses on his new house, and I canâ??t do anything about it, and get wiped out by their foreclosure!!
What should I do to protect my interest? I donâ??t want to just say no, because offers are hard to come by these days.
Thanks in advance.
BTW. How should I use the $50K for something more than the 2.9% CD my bank is offering? Thanks again.
(Update) Anything wrong with this offer? - Posted by Sara_CA
Posted by Sara_CA on June 07, 2008 at 22:29:25:
We are waiting for his construction loan to come through. The buyer has credit score of 650. He said he is buying my property through his companyâ??s name, so he cannot use his personal properties as collateral. Is this correct?
He will think about giving me $75K down payment instead of $50K after his construction loan is approved. Actually at that point I will insist on it. He also must keep his construction loan current, or else my loan is due in full immediately. I figure if the construction lender approves him, I will approve him too.
I may be selling the lot for only $75K cash. Iâ??ll just take the money and hope that I get paid for the rest within 2 years. This may be a tough learning experience, but learn it I will. Times are tough. We must be tougher.
What documents will the title company need to do this? I want to make sure we execute every possible document to make sure this is air tight. Straight Note. 2nd Deed of Trust. Subordinating Agreement. Release of Information Form, so I can know everything about his construction loan anytime. Request for Copy of Notice of Default, so I will be notified as soon as he defaults on the construction loan. These are all the documents I can think of. Anything else?
Thanks in advance again. Thanks creonline.com.
Re: Anything wrong with this offer? - Posted by Natalie-VA
Posted by Natalie-VA on June 04, 2008 at 17:47:19:
See if he owns other property to hold your note against. Is there equity in his current residence?
–Natalie
Re: Anything wrong with this offer? - Posted by Dave T
Posted by Dave T on June 04, 2008 at 07:42:19:
Why not have his builder buy the property and then finance it back to your buyer as a land-home construction package?
You get your full price in cash up front, and, you don’t have any subordination concerns to worry about.
Thanks. More info please. - Posted by Sara_CA
Posted by Sara_CA on June 02, 2008 at 11:21:57:
Thanks for the expert advises.
My property is a 20 acre lot, zoned agricultural, in a tiny town in Kern County, CA. The buyer wants to build a 3000 sq ft house on it. I donâ??t know what the ARV would be after the house is built. I donâ??t know the size of his construction loan either.
Well, the buyer just raised his offer to $160K to get me to accept his offer. $50K down. $110K due in 2 years. Straight Note. No interest. No payments for 2 years while he builds his house and refinance to pay me off. He says he is the president of a construction company that builds carports, storage units, etc. He doesnâ??t care if the soil on my property is alkaline. I am glad he doesnâ??t mind the alkaline soil, but his job title doesnâ??t really say anything to me though. Arenâ??t most construction companies in poor financial health these days?
Still, this is the best offer I can get. The next best offer is $10K down, owner financing the rest. No payment for 2 years while the buyer figures out how to grow agriculture on the 20 acres!
As you can see, my price is already extremely low even in this market. Should I really lower my price even more? It was already for immediate cash sell. I am getting many calls, just no solid cash offers. People still want me to carry paper.
In the worst-case scenario, let say he defaults on his construction loan and the loan company forecloses on him. Who do I hire to bring the first current and add the amount fronted for the 1st to my loan? A title company? Then I have to hire a foreclosure company to do my own foreclosure on him to get title/become owner, while taking the property subject to existing debt. Can the foreclosure company do both of these tasks??? Saves trouble if they can.
Any further insight is greatly appreciated. Never been the 2nd lien holder before, and kinda feeling the stress. And yes. I too, am very grateful to the experts who regularly share here, and for the availability of this great forum. You guys/gals are the best!!
Re: Anything wrong with this offer? - Posted by Kristine-CA
Posted by Kristine-CA on June 02, 2008 at 09:29:15:
Sara: jr. leins are precarious enough. A subordinate jr. lien to a
construction loan in this market? Does your buyer/borrower actually
know what they are doing? Have they built before?
You never have to be wiped out by a senior loan. In CA you always
have the option of bringing the first current and adding any amount
fronted for the 1st to your loan. Then you would have to foreclose to
get title/become owner, still taking the property subject to existing
debt. With a past due construction loan, this will almost always mean
mechanic’s liens and past due property taxes.
I say don’t do it. I’m guessing that this may be the only good offer
you’ve gotten at your asking price? You may want to rethink the price
in order to sell for cash. Just something to think about. Kristine
Re: Anything wrong with this offer? - Posted by IB (NJ)
Posted by IB (NJ) on June 01, 2008 at 20:24:30:
Alot depends on information you did not reveal such as the ARV of the improved land (once the house is built) and the amount of the construction loan.
One thing you may be able to do as a junior lien holder (should he default on the const. loan) is reinstate the loan and foreclose. I would put in my mortgage agreement that he has to keep the senior lien current or else my lien is due in full. That way you have the right to pay whatever needs to be paid to reinstate the senior lien and then foreclose on him for the reinstatement amount you forwarded plus your junior lien.
I would make him come up on his $50k to at least $75k.
Consult an attorney before doing anything.
Ib
Re: (Update) Anything wrong with this offer? - Posted by Natalie-VA
Posted by Natalie-VA on June 08, 2008 at 06:24:09:
Definitely have an attorney do the paperwork. He should have a corporate resolution and also sign a “personal guarantee” that he will pay you back even if his corp does not.
–Natalie
Re: (Update) Anything wrong with this offer? - Posted by Natalie-VA
Posted by Natalie-VA on June 08, 2008 at 06:22:29:
“He said he is buying my property through his companyâ??s name, so he cannot use his personal properties as collateral. Is this correct?”
No, this is not correct. I just recently used a personally owned property as collateral for a loan in my corp’s name.
–Natalie
Re: Thanks. More info please. - Posted by Kristine-CA
Posted by Kristine-CA on June 03, 2008 at 10:22:45:
I don’t believe your price is extremely low. Where do you get that?
Fair market value is the price a property will get on the open market in
a reasonable amount of time WITHOUT special incentives. Seller
carrybacks with no payments are very special incentives indeed. Would
the property sell in 90 days for 100K cash?
It appears that you know very little about notes/trust deeds in CA.
Nothing wrong with that as many FSBOs carry back part (or all) of the
purchase price. But you are taking on a lot more than the note when
dealing with subord. jr. positions and construction. For example, what
happens when the builder runs out of money and wants to get another
loan (and he will if there is equity there)…you’ll be asked to subord.
again. You won’t have much choice at that point because you either
subord. or risk him not finishing.
There is much you need to research and learn about trust deeds and
promissory notes. If this was a 20% seller carryback on an SFH, or even
a 90% seller carryback on an SFH, I’d say make sure of value and you’re
ok. The deal you are proposing is fraught with problems. I know Kern
county well. You are saying you don’t know the future ARV of the
property on which you are in a junior position? Basically you are
selling the property for the cash down payment. Also, there is more to
refinancing a property than ARV. There is the matter of the
buyer/borrower’s credit and income. Self employed in construction.
Doesn’t look great to me.
In the case of foreclosure: Attorneys don’t do foreclosures in CA.
Trustees do. Typically you would re-assign the trust deed to a trustee
service that specializes in trustee’s sales. It would be your job to work
with the holder of the 1st to make up any arrears, etc. Be warned: the
act of foreclosing is a considered a transfer/sale for the purposes of
the due on sale clause. This means if there is equity and the 1st wants
the property, they can foreclose on you as the new owner and not let
you make payments. etc. In this market it is unlikely…most lenders
will take any payment from anyone. But it does happen.
Selling vacant land will often involve seller carrybacks. Banks usually
won’t lend or will end very little. There is a reason. Hopefully you are
beginning to see why. 
Kristine
Re: Thanks. More info please. - Posted by Penny
Posted by Penny on June 02, 2008 at 14:34:41:
To follow on to IB’s great advice, you may want to call a local bank or two (or your own bank) and ask them what their expectations are for land financing. Expect to hear shorter terms and more down, maybe as much as 50%.
Re: Thanks. More info please. - Posted by IB (NJ)
Posted by IB (NJ) on June 02, 2008 at 12:52:16:
Not an expert just someone with some experience in notes and real estate.
You may want to post this in the cash flow discussion board of this site as they can give you more information on the note aspect of your deal.
As a note holder, I would think (at least this is the way we do it in NJ) that you would hire an attorney to handle your foreclosure should it come to that.
My thinking is that either you lower the price or basically accept the offer and consider yourself having sold the lot for $50k (in case you get wiped out by a foreclosure of the 1st after seeing that the arrears is so much it doesn’t make sense for you to reinstate and repossess the property). Depending on the specifics of the construction loan this may or may not be a deal in which you want to involve yourself. Again, we would need to know the amount of the 1st lien, fmv of the property now, ARV of the improved property, confirmation of the borrower’s experience as well as his credit history and financial standing to really advise you on this.
You’re being asked to be a lender so you will have to conduct yourself like one. Do the same due dillegence on the borrower AND colaterral (your property) before agreeing to the deal.
Ib
What is a “corporate resolution”? - Posted by Sara_CA
Posted by Sara_CA on June 08, 2008 at 09:36:14:
What is a “corporate resolution”? What does it say on it?
I will ask for a personal guarantee to cover his corp failure. Doh! Should’ve though of it.
Thanks, Natalie-VA. Thanks to creonline.