[WSBARP] Reversionary Interest in Lieu of Foreclosure

[Bryce Dille]

You can’t have reversionary clause in deed in the event of default since that eliminates the “equity of redemption” You could also take as additional security a second deed of trust on his other property

Bryce H. Dille | Attorney at Law
Dille Law, PLLC
P: 360-350-0270 | F: 844-210-4503
2010 Caton Way SW, Suite 101
Olympia, Washington 98502
www.dillelaw.com<http://www.dillelaw.com/>

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From: wsbarp-bounces at lists.wsbarppt.com <wsbarp-bounces at lists.wsbarppt.com> On Behalf Of David Faber
Sent: Wednesday, November 13, 2019 10:17 AM
To: wsbarp <wsbarp at lists.wsbarppt.com>
Subject: [WSBARP] Reversionary Interest in Lieu of Foreclosure

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

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