Posted by John Merchant on January 03, 2003 at 09:51:44:
Tony VA is right on, and isn’t this the standard?
Think about it…when a buyer goes and gets a new loan to buy a property, what’s he giving the lender? A FIRST mortgage, right? And what’s the Seller gettin? A SECOND, right?
So if you’ll sell this concept to the Seller, he/she shouldn’t be surprised and should grasp the idea quickly.
QUESTION FOR BRONCHIK RE SUBORDINATION ARTICLE - Posted by Valerie
Posted by Valerie on January 02, 2003 at 13:43:55:
“Find a hard money lender in your area who would be willing to lend you $33,000 secured by a first mortgage on the property. Give the proceeds of that loan to the seller at closing. The seller gets a promissory note and mortgage for $67,000, which is subordinate to the hard money first mortgage.”
Bill – This example was given in one of your subordination articles, but I don’t understand how the lender of the $67,000 mortgage would subordinate to a hard money lender, who loans only $33,000.? Can you please explain. And why does the seller get a “promissory note.” Can you please explain. Doesn’t the seller get his $33,000 and $67,000 for purchase of the property?
Thank you,
Valerie
Not Bill, but here’s a thought - Posted by Tony-VA
Posted by Tony-VA on January 03, 2003 at 08:46:14:
The way I am reading what you quoted,
The hard money lends $33k in cash and is secured by the First Mortgage on the property.
The Seller receives this cash.
The seller then takes back a Second mortgage for $67,000. (there is no independent bank or lender involved).
This second is “subordinate” to the first.
This was likely a scenario where the Seller either had to pay off a first or needed that money to walk away.
Tony-VA