Unrecorded deed of trust as collateral for private money loan

[Michael W. McCord]

Hi, I have a proposed deal with a builder that wants to use my private money loan to purchase 5 adjacent townhome lots in Sanger TX in order to secure a construction loan which will have the first lien. He says that we will go to title company and have them issue a deed of trust to me and not record it as it would impair the builder getting the construction loan. So if the deal goes south, I can just go to title company and record the deed. I understand I may need to consult an attorney for my specific case but before I go too far deep into this I wanted to find out from the BP community if this is a viable strategy or something that should generally be avoided.

Thanks!

[Doug Smith]

My answer would be a polite "oh, Hell no!" There is no such thing as a first or second mortgage/deed of trust...it's simply the order in which the deeds are recorded. In the time that you're sitting on that DOT, many others can pile in and file in front of you. After 32 years of cleaning up messes with title through my lending practice, there is no way I would allow them to do that. That being said, it's your money. I wish you well in your endeavor and perhaps we'll work together some day.