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.
· 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
· 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