Train Wreck ahead - HELP

5 Replies

My sisters and I are desperately looking for help/advice on  a situation that i thought we would never be in . I will be a concise as possible . Here are the details

My Father owns 2 adjoining parcels of land  on Long Islands North Shore . House with 3 acres and a 2 acre waterfront parcel

6 yrs ago Dad enters a joint Venture Agreement with a builder who will use the  2 acre waterfront piece - build a home and both will split the profits. Dads skin in the game is his land - the builders are his costs to build .

Early on in the JV my Father refis his home and the parcel of land it sits on . The lot/blocks of both parcels are eerily close in numbers .Mistakenly the bank (out of business now) refinances the vacant waterfront parcel ( where the home is to be built).

Encumbering that parcel breaks the terms of JV. Builder pissed

Builder files lawsuit. My father countersues

Builder files Lis Pendis

My father was out of money at this point

Bank starts FC process

Parents divorce during this and thru the Merger of Doctrine - both parcels become one 

FC Process gets tied up in court 6-yrs now as we able to show how the bank put the refi on wrong parcel thus triggering this chain of events

In meantime we can't sell the property  due to the LIs Pendis ( builder asking for triple damages ) 

On top of all that we just found out their is an IRS federal lien of 150K

The judge in the case wants this solved once and for all in beginning of October

GOOD NEWS -The State of NY wants and will buy the property for preservation reasons  ( Confirmed) - but needs the 150K IRS lien cleaned up before they commit to buying property.

Once property is sold we can pay back the bank and builder 

So my question is in this CRAZY situation - is there some type of Bridge loan available? My sisters don't want to sign personally so the temporary loan would be on the property. Almost like transactional funding ... I anticipate it happening that quick. Again backed up by NYS purchase. Or what would be a enticing rate of return we  maybe can approach an investor with?

If you made it this far ..... Thanks 

Any advice would surely be welcome. Thanks Again


I would think in order to get a loan on the land, you will need to have an agreement in place from the builder to settle.



Wow. What a soap opera. 

Most lenders would look at that situation and balk at financing a bridge unless they are assured of getting clear title if they have to foreclose. This would certainly require a release from the builder, which it sounds like he's unlikely to give. 

The only other option I can see would be if the lender could tie up some cross-collateral. Most lenders in a bridge situation are only willing to go up to 65% - 70% loan to value ratio. Not sure if that's enough to get you out of the danger zone. 

I would consult an attorney who specializes in IRS liens to find out how quickly the lien will be released. I'm sure the IRS doesn't hurry for anyone. This will determine what the lender will need to agree to. 

I've got a checkbox for this scenario. Not unique. Many lessons (at least for others) to be learned here.

Put subject property in a title holding trust. Get a hard money equity based loan. Ask them to negotiate subordination from IRS Agent in Special Procedures Unit. IRS may expect some cash proceeds and if so, request a partial release along with the sub.

Yes, the LP will need to be either lifted or get a court order to expunge. Your impatient judge should be in a mood to cooperate with any sound plan. 

If this were in CA, I'd be interested, but it's not so you'll need to find a local HML.

Now that is one for the books. I just did a funky deal in Rochester, MN that is a soap opera too that I will have to post on here sometime.

You didn't provide the value of the property or what is currently owed on the property, so I don't know if the numbers work. But as a lender I have purchased the existing note, often at a discount, to get around the IRS lien for now and stop the foreclosure process. If there enough equity then take the IRS out too.

It would be helpful to know what the purchase price the State is offering too in order to decide if a settlement offer with the builder is even needed too and how much is at stake for him.

Too many unknowns to really answer your post correctly. But I would guess this is a hard money deal for the right lender. The offer from the buyer would seal the deal perhaps. And if there is a lot of equity then even better in case the sale falls through. I bet you have more leverage over the builder than you realize too.

Good luck.

It would seem to me that you should be able to enter into a contract with the State of NY to purchase the property for X amount of dollars, with the IRS lien being paid out of escrow. The tax lien and title are taken care of together, and viola, no problem. It's done all the time!  As to the lien, I'm sure the State will deal with that, correct? 

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here