Seller Second; Who Has To Know?`
This is somewhat a newbie question but I have never seen a post that talks about it.
When you get a seller to take back a second, do you normally inform the primary lender that you are structuring the deal that way? It would seem to me that if the seller were taking a percentage back in order for the buyer to get a favorable LTV (say 75% to 80%), the bank would frown upon it as now you have another debt. I see talk about seller financing all the time but I have never heard about possible primary lender problems because of it.
Failure to disclose the 2nd would be bank fraud and that is, as they say, a bad thing.
Most commercial lenders care more about how much equity there is behind them than where the equity came from. Many will require 5% of your money. The balance can be a seller second.
There is considerable more variation of underwriting guidelines in the commercial lending because loans do not have to comply with FNMA rules.
C.K.
As always, I appriciate the response. That is what I figured. This commercial forum is great. Just when I thought I was armed with lots of knowledge on residential investing, I came over to this side and am getting exposed to a whole other world. Thanks for the info.
jim
Your loan docs will probably prohibit a 2nd, or only permit with prior approval of the holder of the 1st.