Complicated Question Loaned Money Secured by deed of trust......thanks!


#1

I loaned 66k secured by a 3rd deed of trust to a friend, there are other liens, abstracts etc on the property totalling 1.6 million, including 500k to the irs, the property is worth 2.5 million. I am a real estate agent and the owner wont let me sell the house unless I give him more money secured by the property ie 300k to get the listing.? If everything went well I would make 100k but the risk is losing 300+k? He cant pay me back by our agreed upon date for 66k what do I do?? If I foreclose I run the risk of the senior trust deed foreclosing and wiping me out correct??? If i do nothing my money will just sit there…a little worried…Thanks


#2

Hi Dara,?

Sorry to be the bearer of less than positive news … but you are indeed in a vulnerable position. If **any lender that’s senior to you, opts to foreclose, your position (your loan - secured by deed of trust) is **wiped out. If you’re not being paid on the loan you made ($66K), you can contract with a trustee and may be able to foreclose first. And if no 3rd party investor opts to bid at auction, the home will become ‘lender-owned’ ( you become the new owner) albeit in order to get clear title you would need to pay-off any/all ‘senior’ (by recording date - first in time is first in line) liens/loans/judgments or negotiate repayment payment terms. But you had better be prepared to promptly payoff the senior debt post trustee sale, or as you surmised, you could be the subject of a subsequent foreclosure action.

I would be VERY reluctant to ‘throw good $ after bad’ by making a new $300K loan to the current homeowner. I have seen many instances where well-intentioned people have made junior position loans to distressed homeowners (secured by DOT), only to see these people get wiped out following a foreclosure by a senior lender.?

You said the property is worth about $2.5 million and the known debt totals are about $2.1 million. That’s not much of an equity cushion and penalty interest and fees can dramatically/rapidly increase the debt amount. “Warning Will Robinson! Danger! Danger!”


#3

? ?This guy sounds like a “professional debtor”. ?He will know enough to keep things tied up for years by filing bankruptcies etc.

IF your position is now ahead of at least some of the liens - why not start your own fcl.? ?Or, sell your loan to a professional who is equipped to deal with a professional debtor and has the money to do so. ?

? ? IF you are fairly high up the food chain w. your existing loan - I, or someone here, may be interested in making you an offer. ?How much is owing ahead of you? ?

? ? No professional investor would throw $300K at a deal where ?he would have to make advances for a year or two to senior lenders and wind up nearly doubling (or more) his initial investment. ? You should factor in carrying costs for 18 months when deciding how much to really advance if you are really intent on doing so. ?According to your initial figures - giving him $300K is a guaranteed mega loss.