An MLO on a property with a Lien on it?

5 Replies

Hi all, 

    I'm trying to lock down a deal on a multifamily property. Initially the Seller and I were going down the Seller financing route with terms: 20% down, 30 year AM, 5% with a 7 year balloon.  However, the Seller has brought up the idea of doing a Master Lease Option (MLO) but, with the exact same terms. The reasoning is because he has a lien which spans multiple properties, this one included and says an installment sale won't wouldn't release the lean of the property. 

My concern is this: if I decided to do an MLO and made my payment directly to the Seller's lender, would I not still be in jeopardy because the other properties on the lien (which I have not control over) could default. Wouldn't that put my property with the MLO in jeopardy? ---- Is there another solution that I'm over looking? Could an installment sale still be possible even thought the property currently has lien on it?

@Alex R. You may want to ask your title company about this and see if they can't do a lien search.

@Neal Collins Neal great to hear from you, looks like your my official MLO liaison, lol. So from the last foray with this Seller... initially the MLO was brought up for tax reasons, well after I pointed out that I'd rather do Seller financing (installment sale) since it would be pretty much the same as far as the Seller was concerned in regards to taxes. The broker said there were was another reason and that is that the Seller has a lien which encompasses multiple properties, this one included. 

With this in mind the broker said that the Seller wouldn't be able to do owner financing or an installment sale because of the lien on the property. One of my big reservations now is that if I do an MLO on the property, could I not be putting my option money in jeopardy?  

@Alex R. I will admittedly tell you that I simply don't know very much about liens that span across multiple properties. I would simply be polite and ask more questions. The picture seems real murky right now. I wouldn't want to jeopardize a substantial option consideration payment when their is a crazy lien on the property that apparently won't be removed even if the owner sold the property. Something just doesn't add up.

@Neal Collins I agree; I need more information. I'll start with the County's deeds records, then onto the Title company as you mentioned and then back onto to the Seller/broker. 

I had one of these with a shady seller. We were doing seller financing.  Had to discover the house was collateral for a large blanket mortgage via an O&E title search I ordered up as usual. All that was noted in the master mortgage was the parcel number. I didn't catch it with my title search. Best $80 I've ever spent.

I told the seller if my down payment wasn't enough to release the house when he gave it to the blanketer, then no deal. It wasn't,  so I walked and have never entertained business with that rat since.

An MLO is much less strong than a proper SF deal with ownership, but not much weaker than a land contract. Neither one is great so I'd never put 20% down for either. For options, the most consideration I do is 3%.

Double definitely not do this if you can't get this house removed from under the blanket.

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