Posted by William Bronchick on March 09, 2000 at 10:01:48:
? I have no idea.
Performance Mortgage - Posted by William Bronchick
Posted by William Bronchick on March 08, 2000 at 18:10:08:
This post is for the several people below who responded to my post about using a performance mortgage to protect yourself in a lease/option. The following is from my lease/options course:
"A performance mortgage is a very effective tool for protecting your interest. Typically, a mortgage is recorded to secure payments on a promissory note. In fact, a mortgage can be recorded to secure performance of any agreement that requires performance, even a contract or purchase option.
You as optionee (buyer) will now be a lienholder, in the same position as a secured lender. If the seller refuses perform on the option agreement (i.e., refuses to sell the property), he is in breach. The breach of the option agreement gives you the right to foreclose the property under the mortgage agreement. Now the SELLER has to go to court to protect himself, rather than the other way around.
If you are a secured lienholder under a performance mortgage, you have some other benefits, such as:
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The right to redeem the property from foreclosure if the underlying mortgage is in default or foreclosed upon
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The right to be insured as a lienholder
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Securing the equity in the property from further liens and judgments
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Better position than unsecured lienholders if the seller files for Bankruptcy protection.
Re: Performance Mortgage - Posted by Gene S Hou Tx
Posted by Gene S Hou Tx on March 08, 2000 at 23:32:28:
Hello Bill:
I have your course and I’m so glad you covered the perf DOT in it. You can bet I won’t be doing a s/w l/o without the 3 tiers of protection you teach! Your L/O course gave me a comfort level that I couldn’t get from the other guy.
Here is something I have never been able to get a good answer on. I got a “Model L/O Agreement” written by an atty for MR LANDLORD. Under “Further Assurances” (of t/b) the atty has a clause as follows:
(B) A Second Mortgage covering the subject property, for the face amount of $20,000, non-recourse to the Landlord/seller, for the term hereof,granted to the favor of the tenant/buyer or its designee, in a form and manner suitable for public recording;and
(C) etc. etc,
My question is about the phrase “NON-RECOURSE”. Why do you think the atty has this wording in there? Is there something subtle I’m missing on this benefit to the L/S? Would it be a good idea to insert this language in the diskette I got from you? I’ve posted this before but I could tell by the answers everyone was confused. Thanks!
P.S. I’ll be seeing you at Las Vegas seminar!!!
Re: Performance Mortgage - Posted by JPiper
Posted by JPiper on March 09, 2000 at 10:43:15:
In the prior thread I gave my opinion on the clause. In some states a second mortgage would give you the right to pursue a deficiency judgment if you foreclosed on a property and then sold it for less than the loan amount. Non-recourse would eliminate that possibility.
However, think about it. When would this come into play? You already are under contract with a tenant/buyer. If he doesn’t exercise, then why would you be foreclosing with your performance mortgage? Why would you foreclose and sell for less and then pursue this deficiency? That strategy makes no sense. If the tenant did exercise, he would be paying a higher price, not a lower price, thereby eliminating the ability to pursue the deficiency judgment. I don’t see the value of the clause particularly.
JPiper
why not… - Posted by tang-0-rang
Posted by tang-0-rang on March 09, 2000 at 10:15:28:
…contact the author of the contract and ask what the wording does or is used for.
Todd Williamson