Posted by Perry on April 14, 2004 at 17:15:54:
Thanks JohnBoy, for all your input. I believe you are right about the second. The real issue is as you stated, the first is pretty well protected. You helped clear up the confusion. Thanks, Perry
re: Sales Contract - Posted by Perry
Posted by Perry on April 12, 2004 at 11:40:51:
I am selling a home I own free and clear to an individual on a contract sale. Now the individual said he would like to take title and have the contract in his name as well as his 2 adult children. I really don’t mind if I can protect my asset until it is paid off. So I am wondering how can I word something that would say that no 2nds, no equity lines, liens, judgements, etc…? Would this make the note due in full or would they be in default and foreclosure would be necessary? Is there anything else I should address in this case that you could think of? Thanks.
Sales Contract vs. Deed w DT - Posted by John Merchant
Posted by John Merchant on April 12, 2004 at 20:08:16:
While you could use a deed of trust form that would let you call the note if he gave a 2d, failed to insure, etc., etc., I’d think long and hard about this if I were you.
In my state of WA, it’s MUCH easier to repo & get the RE back on a REC than it is on a DT securing a note, and no lawyer or pro foreclosure co. is required on the REC forfeiture, so here, I much prefer the REC over the deed with DT.
If your buyer wants this badly enough, I’d sure make him pay more upfront, in down payment, so he’s making a big commitment on the front end.
Re: Sales Contract vs. Deed w DT - Posted by Perry
Posted by Perry on April 13, 2004 at 16:04:11:
John, thank you very much for your information. This property is in Utah. I did receive a large down payment upfront and I have made provisions for all costs incurred in foreclosure to be paid by the buyers. I intend to record a ?Note Secured by Deed of Trust?. My question is really about proper wording I suppose. How do I state that liens, judgments, seconds, equity lines, etc?cause the buyers to be in default? Again, if there is anything else that I am missing, I do appreciate any information. Thanks again.
Re: Sales Contract vs. Deed w DT - Posted by John Merchant
Posted by John Merchant on April 13, 2004 at 16:41:14:
Perry
You need to have the title/escrow co. do these docs for you so they’ll be done right. They do them all the time and have the right forms. It’s actually legal practice, but the Limited Practice Officers of the escrow co. are legally permitted to prepare such, using pre-printed forms prepared & approved by the local Bar Association.
In your contract, you need to spell out all the acceleration clause items you want, such as no 2d, no delinquent taxes, insurance kept current, etc…and then escrow will prepare the right D/T form and it will have all such in it.
Re: Sales Contract vs. Deed w DT - Posted by JohnBoy
Posted by JohnBoy on April 13, 2004 at 20:56:01:
Are you sure you could enforce a clause in a TD pertaining to a second mortgage on a property? I didn’t think such a clause is enforceable. I thought some states even have laws pertaining to this issue where a lender couldn’t enforce this type of restriction.
In a CFD it would be enforceable since title is still held by the seller. But if you sell and carry a note secured by a TD then you are just a secured creditor where title passed to the buyer. If the buyer was to have a second against the property that would in no way jepordize the first mortgage holder’s security. If the buyer defaults on the second the second would foreclose and have to pay off the first. If the buyer defaults on the first the first must foreclose and the second would be wiped out. Either way the first is the first to get paid no matter what. So where does the first have any risks involved if a second is put against the property?
Things like taxes would be enforceable since that would impose a risk against the first if not paid. But a second mortgage would not since that is junior to the first. So I don’t think adding such a clause could be enforced against by a first lien secured by a TD.
If you are worried about a second then don’t sell by passing title and securing a note secured by a TD. Sell on a CFD instead where the seller retains legal title until the amount is paid in full. If you sell by passing title and securing a note with a TD you will have to foreclose no matter what, regardless of whether there is a second or not. So what difference would it make if the buyer took out a second or not? On what grounds would the first have to enforce such a clause in a TD?
Once you sell to someone else then it becomes their property, period. Any secomd against the property is the buyer’s equity they are giving as security, not the seller’s. The seller merely becomes a secured creditor holding a note secured by a TD. I wouldn’t think such a clause stating the buyer would be default on the first by taking a second on the property could be enforced. Yes or No?