Buying on seller finance, selling on land contract: how to secure

[Sean Dezoysa]

Let's assume this scenario:

A-B sale. Seller sells a house for 10k down, 190k note secured by deed of trust in first position

B-C sale. Investor resells house on a land contract, 15k down, 200k note secured by deed of trust in 2nd position.

If the above house ARV is 210k this seems to be a problem: liens of almost twice the home value encumber the house and block a sale or refinance.

So if the above structure is not valid, and a 2nd note can not be attached as a 2nd deed of trust, can someone educate me on how the investor's position should be secured?

[Chris Seveney]

@Sean Dezoysa

Land contract is recorded but the land contract buyer has to be aware their is a loan on the asset. Some states do not allow land contract to be encumbered by a loan and others like North Carolina require you to fill at an affidavit yearly if you have a property on land contract on the value of the land contract balance and value of the loan left - that way if you were to lie it’s a easier for them to come after you for fraud.

I do not recommend selling on land contract with underlying note. I would recommend a subject 2 instead