All Forum Posts by: Taylor Green

Hi,

I was wondering the best way to go about getting loan documentation (promissory note, deed of trust, business loan agreement) in order to lend on my first property.

I have read I could buy standard loan templates online, but is it worth it having an attorney draft them up instead?

Also, is there a way I would be able to use the same loan documents for each loan I do in the future, and just be able to change certain things like the interest amount and the borrowers name? Or will I have an attorney re-draft new documents for each loan?

Roughly, what should I be expecting to pay for these documents?

Thanks again for all the help...

Thanks again for all the response, good information.

As far as making sure the borrower has sufficient collateral, is it common practice to add a default interest penalty to the loan agreement or promissory note?

If the borrower defaults on the loan, the lender could then add (for example 4 points to the loan) in order to add incentive to the borrower to not default. Especially if a loan is at a high LTV? I'm not sure if that is normal or even if it's legal with the usury laws.

Thanks again for the responses.

Sorry for the confusion, I originally meant 100% of the purchase price, not the ARV. But it's good to see experienced lenders opinions on this...

Basically, from what I am understanding is you never want to go to a 100% of even the purchase price unless you have a personal track record with the borrower or you know the area/property well enough that there is built in equity.

If the borrower agrees to a recourse loan and gives a personal guarantee does that change anything? Or should I not make a loan without those terms included anyways, no matter what the LTV % is.

Hi,

I was interested to see how much a borrowers track record should matter when you are thinking about lending on one of their properties.

If a borrower seems trustworthy and has a long, flawless track record would you feel comfortable loaning at almost a 100% LTV, compared to that of somebody who doesn't have as long of track record, but at 70% LTV?

I appreciate it Ellis.

@Ellis San Jose

With regards to the 'automatic stay',

Since I would be a secured lender, I could petition the bankruptcy court to hopefully get the property back so I could recover my investment. They could rule either way though I'm sure, but at least it's an option.

Also, what type of language should I tell the attorney to write in the promissory note or deed of trust to safeguard me against the lender going into bankruptcy?

The attorney should know the answer to that anyways though...

Thanks again.

Thanks for answering!

Please correct me if I'm wrong...

From what I am understanding, if the borrower goes into bankruptcy the foreclosure process would still work the same. The property still goes to the trustee sale/auction, and if the property is bought at the price set (or higher) by the lender, the money owed first goes to the lender, then if there is something left over it would go to the creditors.

The biggest risk seems like the delay of getting to the foreclosure. Once the borrower goes to bankruptcy, the court freezes the property to determine if there is equity in the property that could help pay the creditors. Meanwhile, the lender would be paying the holding costs associated so there wouldn't be a tax lien put on the property. Once the court makes a decision, the foreclosure process would then start and work the same way it always does.

I am in the ballpark with that?

Thanks again...

I had another question I thought I would ask in this thread because there seems to be a lot of experienced lenders... This might be a bad question, but I am having a hard time scanning through old threads finding answers for it.

What happens if you are lending on a property and the borrower files for bankruptcy?

Thanks again.

Great seeing all the different experiences. Thanks for posting.

Thanks everybody for responding. I'm still trying to figure out some of the stuff said in the posts.

I had a quick question on how a Deed in Lieu works. From what I understand, a Deed in Lieu is when the borrower hands over title to the lender in exchange for the lender canceling the debt. How long should you ask the borrower to try and sell the property before you accept the Deed in Lieu?

Also, can you write in the original contract that if the borrower defaults they have to give you the property back via Deed in Lieu if they can't sell the property within a specific time frame (1 month or so)

Thanks.

Okay I really appreciate it @Ellis San Jose

I do not take anything critical at all, more the opposite, very helpful... Thanks for taking the time...

Yes "A" would have first deed of trust.

Yes "A" would be an equity partner, I did use the wrong terminology of being a lender.

Is there a way to secure "B" by just using paper? Or is that once again a bad deal for "B" because you want more collateral that 1:1. (75k-75k)

Thanks for the help.