Buying a 2nd mtg at discount - Posted by Peter

Real Estate Investing
1

Posted by Nate(DC) on April 04, 2002 at 01:30:19:

Tim,

Thank you for conveying the questions that I was trying to get at, more eloquently than I could this late at night.

NT

2

Buying a 2nd mtg at discount - Posted by Peter

Posted by Peter on April 03, 2002 at 20:29:15:

I have the chance to buy a $21,000 second mortgage at 7.5%. It is ammortized for ten years, with payments of $300 per month, the loan balloons in 3 years, my investment is $6,000. If the loan defaults, there is a clause in the note that the property will revert back to me.

Does anyone have any advice about this or is there anything I should be concerned with?

Thank you,
Peter

3

Re: Buying a 2nd mtg at discount - Posted by Stacy (AZ)

Posted by Stacy (AZ) on April 04, 2002 at 11:09:23:

I’m wondering about the clause in the note that states, “if the loan defaults, the property will revert back to me.” Can you give us the actual text of that clause? From your description, it seems to attempt to circumvent the foreclosure process in your state. That’s a no-no, and if there’s ever a question whether that clause may be used, or if state statutes would prevail, the statutes win. You’d have to foreclose to get the property regardless of what the note says.

Did I misunderstand?

4

Re: Buying a 2nd mtg at discount - Posted by Tim Fierro (Tacoma, WA)

Posted by Tim Fierro (Tacoma, WA) on April 04, 2002 at 24:30:40:

Besides what Nate has mentioned, how much is the 1st for and/or what is the balance left on it? How much is the property worth that it is secured by?

While the discount and the money might look attractive, what is it secured against and how does that affect your position should the payor not pay?

5

Re: Buying a 2nd mtg at discount - Posted by Nate(DC)

Posted by Nate(DC) on April 03, 2002 at 22:15:29:

Do you know what it means to buy a “second mortgage”?

If so, you’ll know that if the buyer defaults, the property does NOT get conveyed back to you unless you foreclose, and even then, you still need to pay off the first mortgage to have free and clear title?

If it’s still a good deal, do it. That sentence made me think you don’t understand the deal, however.