The Gordian Knot

The ongoing theme of this blog is dedicated to topics related to alternative ways to view, work and profit from real estate-related transactions. 

The Gordian Knot - history

The Gordian Knot is a legend of Phrygian Gordium associated with Alexander the Great. It is often used as a metaphor for an intractable problem (disentangling an "impossible" knot) solved easily by shortcutting or "thinking outside the box" ("cutting the Gordian knot").  

As I understand the story Gordium, the ruler of an ancient kingdom, wish to find a suitable groom for his Daughter, a man possessing exceptional qualities who would someday rule the kingdom.  His method was to tie a large rope into a massive knot and invite prospective suitors to attempt to untie it.  Hundreds tried—and failed—until one day, the winning applicant appeared (Alexander the Great) and sliced the knot in half with one mighty stroke of his sword.

Practical Applications

In my early years of real estate, I was puzzled by title.  I had no clue about how documents were recorded, or how the title insurance companies operated. I just assumed that title companies were there to fix problems.  I also learned that title insurance companies typically use a different data repository (aka title plant) and their system is set up for their convenience, period.  

Many years ago, I received a lead call from a property in default in a nearby community that I really wanted to live in but could not afford at the time.  The owner described his dilemma: he had a first, second, third, fourth and fifth on the property which over-encumbered the property by several hundred thousand dollars.  On top of this, one of the mortgages was cross-collateralized with a rental and three of the loans were to family members.  The property, while appealing, needed a substantial amount of work, too.  

Discouraged, I talked to a friend who suggested I speak to a title attorney and see if there were any approaches or opportunities that I had missed.  ‘Yes, there was’, replied the old-school attorney. He proceeded to explain that the 5th trust deed was actually in 3rd position due to subordination agreement that had been signed and recorded earlier. This was the best $250 that I have ever spent! 

So, I proceeded to purchase the 5th TD (which was actually a 3rd TD) by exchanging it for another note that I owned on different property.  I learned how to do this from a seminar that I had attended previously. 

I then completed what I now call a “friendly foreclosure” for the purpose of clearing title and wiping off the other two trust deeds, which freed up several hundred thousand dollars in equity.  

What I learned from this was that, by thinking outside the box, investing in my own education and utilizing the skills of experts, I could profit wildly. I’ve devoted much effort into developing expertise in real estate title in order to repeatedly turn lemons into lemonade.

By the way, this same house has been my primary home for over twenty years. 

Rick Harmon - Ricktheprobateguy.com