[WSBARP] Due on Sale Clauses and Real Estate Contracts

Thu Dec 7 12:02:39 PST 2023

I've spoken with investors who frequently use this type of seller carryback and have not had any problems with the lenders calling the loan. I understand the concern about the rising interest rates leading to lenders taking action, but I think there's also a practical consideration that lenders do not want to be viewed by potential customers as creating this kind of hardship. From a business perspective, it seems like it would be a net negative.

Zach Burr, J.D.
Burrwood Law Group
Zach at Burrwoodlaw.com
www.burrwoodlaw.com<http://www.burrwoodlaw.com/>
(253) 374-9555
6716 Eastside Drive NE, Ste 1-436
Browns Point, WA 98422

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Today's Topics:

   1. Re: Due on Sale Clauses and Real Estate Contracts (Paul Neumiller)

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Message: 1
Date: Thu, 7 Dec 2023 14:51:21 +0000
From: Paul Neumiller <pneumiller at hotmail.com>
To: WSBA Real Property Listserv <wsbarp at lists.wsbarppt.com>
Subject: Re: [WSBARP] Due on Sale Clauses and Real Estate Contracts
Message-ID:
        <SJ0PR17MB6500A4F87423261CA35721ADD28BA at SJ0PR17MB6500.namprd17.prod.outlook.com>

Content-Type: text/plain; charset="windows-1252"

I agree. The Client is not going to hide the transaction from the first lien holder.  I am inquiring if a lender will allow a Real Estate Contract.

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From: wsbarp-bounces at lists.wsbarppt.com <wsbarp-bounces at lists.wsbarppt.com> on behalf of Nestor Gorfinkel <nestor at GlcLawyer.com>
Sent: Thursday, December 7, 2023 6:33:53 AM
To: WSBA Real Property Listserv <wsbarp at lists.wsbarppt.com>
Subject: Re: [WSBARP] Due on Sale Clauses and Real Estate Contracts

The problem arises is how does the property appraiser and tax collector deal with the real estate contract. When recorded, do their records reflect the contract vendor or vendee. If they make the change and a tax bill is issued in the name of the vendee/purchaser, when the Lender verifies the payment of the property taxes, they can then move to enforce the due on sale clause. Also, regarding property insurance. Whose name will appear on the property insurance? The change in name can also alert the Lender.

Be careful.

Cordially,

Nestor Gorfinkel, Attorney at Law

Licensed in Florida & Washington State

Florida Civil-Law (International) Notary

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From: wsbarp-bounces at lists.wsbarppt.com <wsbarp-bounces at lists.wsbarppt.com> On Behalf Of Paul Neumiller
Sent: Wednesday, December 6, 2023 7:02 PM
To: WSBA Real Property Listserv <wsbarp at lists.wsbarppt.com>
Subject: [WSBARP] Due on Sale Clauses and Real Estate Contracts

What is the experience of people under this scenario (and I know I need to read the loan documents)?  Client wants to buy commercial property with an existing first lien.  Client doesn?t have the money to pay off the first lien but the seller is willing to carry the balance financing.  Parties contemplate that the Client will pay both the existing loan and the seller carryback loan.  Title company is suggesting that a Real Estate Contract might be able to get around the Due on Sale Clause in the existing loan because title does not vest in the Client/Buyer until the financing is paid in full.  This doesn?t quite pass the smell test for me.  In this age of rising interest rates (or, at least, higher interest rates), are lenders really not calling in their loans under the standard Due on Sale Clause if the parties use a Real Estate Contract?  What is the experience of the title companies?

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