HML Interesting Scenario

3 Replies

I have an interesting Hard Money Loan scenario that came up and I wanted to call on some of the veterans out there for advice.

This is a refi for a home in the city. The owner originally had purchased two side by side properties that were deeded separate and had their own distinct addresses. There was a middle wall separating the two homes which he knocked down and created one large SFH. He then had the two previous addresses deeded to one single address.

Now, he is looking to sell, put the wall back up and revert the property back to its original two separately deeded addresses.

My question how would you structure this to protect the loan? Once the address is reverted back to the previous two addresses the loan would be against a property address that no longer exists. Would this require a restructure once the properties are re-deeded, is that something that would be written into the original loan structure and just carry over to the new addresses once re-deeded, can someone even have a property address changed without consent of the lender, etc

Any previous experience with this type of scenario would be much appreciated.  

Lastly, the property(s) will be delivered vacant in an entity and we are under 50% of the as-is value so we are well leveraged from a traditional standpoint.  

I think I may have found my own answer but still not 100%. Is it because the loan is really against the plot and block vs physical address? Therefore no matter the address changes or alterations the lien still holds based on the legal description?

This would make the sale of either lot or any part of the said property contingent on our approval though correct?  

@Andrew Michael

I've done this exact thing before, funny enough, and got a loan on the physical address and then put the wall back in and re-installed the kitchen. At the time it worked out, but the appraisal had to work as a SFR and then the rehab came from me. You may instead start with the county and make sure it is going to be a legal duplex before you apply for the loan and find out what is needed to make it legal first. Maybe there are only small changes the seller can make to get a loan on the property as a duplex.

@Darren Eady  

I am actually the lender here. It is not quite a duplex but rather an attached SFH. The appraisal checked out so I think we are ok to proceed but it was a new/interesting scenario for me.

Thanks for your input, glad to hear past stories of similar scenarios.