Legal Question in Real Estate Law in California
I got myself into a pickle. I called an escrow company to see if I could carry a loan on a property that I'm still paying on. They said "yes" and that its called a wraparound. I listed the property and told the prospective buyer about the wraparound and she's fine.
When I called the escrow company to open escrow, I asked more questions and was told that I may have signed a "due upon sale" clause, which I did.
The previous owner isn't willing to consent to the wraparound because he'd lose his position.
Any options?
I really need to sell this property and I negotiated a great deal for this economy.
Thanks a bunch.
3 Answers from Attorneys
Options? Yes: Negotiation. With the previous owner that is. If you want his cooperation, you'll have to make it worth his while. You're attempting a very problem laden escrow, so be prepared to invest time, effort and some money in doing so. If serious about getting legal help in this, feel free to contact me. You're going to need a range of legal documents created and/or reviewed.
It sounds like the previous owner is also the holder of the existing mortgage on the property. A "wraparound" is a second mortgage, junior in priority to the existing first mortgage. The existing owner/mortgagee does not lose his lien priority when a second mortgage/wraparound is recorded. He still has the right to object pursuant to the due-on-sale clause, so you'll have to convince him as to why he should be comfortable with the transaction. You do understand that under a wraparound mortgage you continue to make payments on the first mortgage even after the sale is closed, right? Either that or you pay an escrow company to collect the payments every month and remit your share to you and the first lender's share to him.
It sounds like the previous owner is also the holder of the existing mortgage on the property. A "wraparound" is a second mortgage, junior in priority to the existing first mortgage. The existing owner/mortgagee does not lose his lien priority when a second mortgage/wraparound is recorded. He still has the right to object pursuant to the due-on-sale clause, so you'll have to convince him as to why he should be comfortable with the transaction. You do understand that under a wraparound mortgage you continue to make payments on the first mortgage even after the sale is closed, right? Either that or you pay an escrow company to collect the payments every month and remit your share to you and the first lender's share to him.
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