Posted by TKP, Houston on July 20, 2003 at 19:48:49:
Doug, If you sell on a “Wrap” i.e. seller financing, I would think your lien will be superior to any judgement. Certainly, it would be difficult for your buyer to refinance “down the road”, but if she should default and you would have to foreclose the judgement would no longer attach to the property. Also, most holders of Judgement do not know that their position has been improved because the debtor has bought real estate, so you - or your buyer - might well be able to buy that judgement for pennies on the dollar also in the future.
TKP, Houston
I?m considering the purchase of a property with bank financing (10% down), and then selling it on a wrap for a higher price and at a higher interest rate to create a note for my own portfolio. Although the buyer’s credit is pretty bad, she has been renting from a relative of mine for three years and has never missed a payment.
My concern is that the buyer has several judgments filed against her (mostly leftovers from a messy divorce), all of which appear on her credit report, one of which appears in the public records of the county where the property is located.
Questions ? do I need to be concerned about her judgments attaching to the property? If so, is there a way to structure the transaction to keep this from happening? For example, should I deed the property into a land trust after I purchase it and then sell the beneficial interest via land contract? Please advise.
Record the deed to your property in the name of XXX, Trustee for the XYZ Land Trust. AFter recording, assign up to 90% of your beneficial interest to the woman. Any judgments against her will NOT attach to the property title. She will have a personal property interest in the Trust- which is private and not recorded. When it’s time to sell, the TRUSTEE will be directed by the beneficiaries to sell the property and distribute the proceeds to the lenders and beneficiary(s) of record. Her name will not appear in any public documents so a judgment search will never be performed for her name… it’s not relevant.
Re: Judgments against my buyer… - Posted by John Merchant
Posted by John Merchant on July 18, 2003 at 10:14:09:
Questions ? do I need to be concerned about her judgments attaching to the property? If so, is there a way to structure the transaction to keep this from happening?
If that J has been recorded in Deed Records/Recorder’s Office, then it is a lien against that RE, and NO title company is going to give a title policy or any kind of guarantee on the title until that J has been safisfied and released. Oh, you could still take a deed from the Seller, subject to that lien, but that J lien is going to remain on title until it’s paid…and no lender would loan on. Until the J is released and gone, or as part of their loan package.
Now, if you have superior knowledge of the inherent or prospective value of that RE, the smartest move you might make is to do a little digging into who owns that J, maybe make a call to him telling him you might give a few cents for his J, etc. You might be able to buy it VERY cheaply, as most Js are never collected, he may not realize he’s in a good lien position on the RE title, etc.