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Real Estate Finance
Santa Clara University School of Law
Mertens, Cynthia A.

 
Real Estate Finance Outline
 
–         Unsecured Debt
o       Debt which the Creditor has no collateral.
§         They have no interest in any property of the debtor that it may collect or liquidate to satisfy the debt.
o       Means of Collection/Enforcement
§         Creditor must sue the debtor for a money judgment, and then seek to enforce that money judgment against the property.
·        The Judgment does not give the Creditor an interest in the property, this only comes through execution of the judgment.
§         Judgments
·        They are only enforceable for a certain period of time, subject to timely renewal. (Cal. = 10 years)
o       Types of Executions
§         Execution Lien = Property is seized by the Sheriff, and upon appropriate notice, sells the property at auction to the highest bidder.
·        Generally does not fetch a price to satisfy all the debt b/c there are no Warranties on the Title, and purchasers take subject to Existing Liens.
§         Garnishment Writ
o       Judgment Lien
§         Creditor records a lien on the Real Property in the Country, w/ or w/out the execution process, in which the Debtor has an interest.
·        This establishes priority for the Creditor, and do not interrupt the debtor’s possession of the Property.
§         Collection à when the Debtor goes to sell, any Purchaser is going to request that the Lien be paid off with the Purchase Money.
o       Pre-Judgment Attachment
§         Creditor can file a pre-judgment attachment that secures their Priority against Liens that may come before the fina

ain control of the Collateral
o       Don’t have to first seek a judgment.
·        2. Secures your Priority, and gives you the right to satisfy your debt before paying off lower, competing claims.
·        3. Gives you better treatment and Advantages during Bankruptcy.
§         Saves Time and Money
·        Can reach security without having to go to Court.
–         Financing and Foreclosure Basics
o       2 Types of Foreclosure
§         Judicial
·        File a Complaint in Court, which then allows you to Proceed with Foreclosure
·        Allows you to receive a Deficiency.
·        Allows for Redemption by the Debtor.
§         Non-Judicial/Power of Sale
·        Use a clause contained in the Deed of Trust
·        Don’t need to go to Court
·        Faster and Cheaper
·        No Deficiency is Allowed
·        No Redemption by the Debtor.
o       After a Non-Judicial Foreclosure the Debtor owes nothing further.
·        Not considered an Action Via 726
o       Seller Carry-Back
§         Viewed as an Extension of Credit, not a Loan.
§         The Seller can charge what ever Interest Rate they can’t get the buyer to Accept.
§         Reasons for Carry-Back
·        Tax Reasons
o       Don’t have to pay Capital Gains all at the same time.
·        Higher Interest
·        Security Interest in the Property
·        Provides a Steady Stream of Income