[WSBARP] Reversionary Interest in Lieu of Foreclosure

[David Faber]

List:

I'm working with a client to negotiate a somewhat unique purchase
agreement. C owns a lot with a partially-built house on it and has found a
buyer who wants to complete the house. B lacks sufficient liquidity to buy
the property outright and instead needs C to carry the note during the
final buildout with a balloon payment at 1 year, at which point B will
either get a bank loan on the completed house to pay off the balance of the
note or sell his other house to make the balloon payment. My concern is
that this presents a significant risk to C in that a trustee's sale is
probably not going to generate sufficient funds to pay off the full balance
of the note. Instead, C is interested in retaining a reversionary interest
in case the balloon payment deadline is missed. I have been able to find
nothing that expressly forebids this but I have a nagging sense in the back
of my mind that this kind of loan structure might violate one or two
consumer protection laws that I cannot put my finger on.

Has anyone dealt with a seller-carried mortgage transaction that included a
reversionary clause on the deed who would be willing to chat with me about
it?

Using a REK is not ideal because of some additional complications.

Best,
David J. Faber
Faber Feinson PLLC
210 Polk Street, Suite 1
Port Townsend, WA 98368
(360) 379-4110

*** NOTICE: ATTORNEY CLIENT COMMUNICATION - PRIVILEGED & CONFIDENTIAL.
This communication may contain privileged or other confidential
information. If you are not the intended recipient, or believe that
you have received this communication in error, please do not print,
copy, retransmit, disseminate, or otherwise use the information. Also,
please indicate to the sender that you have received this communication in
error, and destroy the copy you received.***
-------------- next part --------------
An HTML attachment was scrubbed...
URL: <http://mailman.fsr.com/pipermail/wsbarp/attachments/20191113/ea6d126f/attachment.html>