One exit stratergy to use IF they find out… - Posted by Michael Morrongiello
Posted by Michael Morrongiello on July 06, 2001 at 14:48:34:
Often I have sellers who have sold their properties under a land contract, lease option, or some other form of “wrap around” type agreement where the payments are coming in to them and then they in turn must make payments out to the existing lienholder /lender on the property.
Sometimes the fear that you suggest becomes a Reality where the 1st lien lender gets wind of this “sale” or option and decides to get tough with the investor and attempts to enforce the infamous “DOS” due on sale provision in their mortgage in effect in an attempt to unravel this “psuedo” sale that has taken place.
All other things being acceptable, where sufficient equity exists between what is owed to you and what you owe to the lienholder, here is one solution/technique that can be used to generate quick cash and to simply be in a position of paying off the lienholder who is trying to accelerate their loan effectively stopping them in their tracks…
You can sell off your your land contract, agreement for deed, contract for deed, or such other installment sales agreement OR you can elect to convert your existing lease option arrangement you have with your prospective buyer into such a Seller financed type agreement (contract as indicated above or a mortgage, trust deed, etc.) where you agree to in essence finance them now as a BUYER and not a tennant buyer.
This existing or newly created debt instrument is then SOLD off and coverted into a Lump Sum CASH payout where from these proceeds, you would simply retire the existing mortgage lienholders debt.
When the dust settles, you have taken out or satisfied the existing lienholder by paying them off, and you will have cash in hand to move on to do your next deal.
This simply but very effective stratergy works well for either of these situations where a potential DOS violation is of concern.
To your success,
Michael Morrongiello