Any Private Lenders Signed the Detroit Land Bank's Subordination Agreement?

Question

We're working to originate a private loan on a SFH in Detroit, MI. The investor buyer is purchasing the property from the Detroit Land Bank Authority (DLBA).

As part of the closing, DLBA is requiring that the lender execute the attached Subordination Agreement.

I don't love everything I'm reading, but I'm curious to see if others have gone through this.

How did you assess the risk to the lender in this situation?

Grateful in advance for any help this fine community can offer!

Nick Sehy · Answer

Hi Mitch,

Essentially the DLBA has the right to take back the home in the case that the investor does not complete the property. I believe it is giving 12 months now, but from what i've seen they are almost always willing to work with the investor as long as they are continuing to make progress on the property. I'm currently doing 2 DLBA myself and haven't had any issues.

Nicole Gentles · Answer

Hey Mitch,

We just bought one of their property closing in February. Being that you now have experience with the subordinate agreement lets chat.

Mitch Messer · Answer

Hi Nicole, I'm happy to chat but I don't DM here.

Please email me (my address is in my BP profile) and let's discuss!

Mitch Messer · Answer

Hey Nick, thank you for this response.

Yeah, we did decide to move forward with that deal. So far, so good!

Jaycee Greene · Answer

Hey @Mitch Messer! Is the DLBA financing a portion of the transaction?

Mitch Messer · Answer

Hey Jaycee, thanks for your reply. No, all the funding is being provided by the private lender.

Apparently, the way this works is the DLBA allows the sale under specific conditions, including that the property be renovated to a certain standard within a set period of time.

If these conditions aren't met, the DLBA can effectively step in and take back the property.

Or, at least, that's my understanding.

Anyone have any experience with this?

Any Private Lenders Signed the Detroit Land Bank's Subordination Agreement?

Most Popular Reply