Big convoluted mess. Have to forclose on lien as 2nd mortgage

[Warped]

What is the name of your state? VA

This is a pretty convoluted mess. I will try to be as brief as possible. I am posting this because I would like a second/third opinion on the matter. I have every confidence in my attorneys and they are well respected in the area.

I sold 2 adjoining properties to a developer. After delaying closing 8 times, they finally agreed to a date. The day before that day, their realtor called mine and asked if I would take a lien on the properties for 30 days for $65,000.00. They agreed to pay me $3000.00 extra above the agreed upon selling price. The extra $3k was their idea. I eventually agreed but only if they agreed to a $500.00 per day penalty if they didn't close by the 30th day. As of today, they are 44 days past due. My attorneys said that the penalty for them being late probably wouldn't hold water in court.

Here's the kicker. Almost immediately after they closed on their end (separate closings), they sold the property to one of their "investors" at a profit. They then recorded the deeds in this order. Me to them. Them to investor. First mortgage of said investor. My lien on both properties.

Today I spoke with a local real estate law firm and they agreed to begin the foreclosure process but not until they perform a thorough title search on both properties.

My questions are...

1: Is recording the deeds in the manner that they did illegal and can I sue for damages as a result?

2: The buyer's attorney recorded the deeds. I have reason to believe that they did it in the manner listed above specifically for other than honorable reasons. Can I go after them legally?

3: The president of the development firm recently had a 3 part column done about his business practices in the local newspaper. It doesn't look good for him. Can I go after him or his assetts?

4: Will the $500.00 per day penalty for being late in paying me the principal ($65k) hold water in court? The developer signed the addendum to the contract for sale as well as a note (promissory note) stating that he would pay the penalty if he is late. That effectively makes it a legal, binding contract, does it not?

5: If foreclosure does go through, what happens? Will that trigger the first lienholder to foreclose? What are the chances that I will get at least the principal ($65k) in full?

6: Since the lien is actually attached to the property itself, is the current owner, their "investor", now liable for it since he bought the houses presumably with the knowledge that there was a lien on both of them?

I would really love to hear the opinion of the good folks here. I'm not a sue-happy person, I just want the money that is owed to me and for this whole mess to be completed.

[Warped]

31 views and no response? C'mon!

[LindaP777]

First, I'm sorry for your trouble.
Second, You are not getting any answers because the story is complex and can not be address correctly and quickly on this forum.
My opinion; You should have had an attorney representing you and your best interest.

[nextwife]

Did you require the seller to obtain a mortgagors Jr. title policy, insuring the position of your mortgage? Like the first mortgage lender would normally require?

If so, contact the title company/closing agent and ask what gives. IT was their responsibility to be certain the documents were recorded correctly to protect the insured position.

[Warped]

Originally Posted by nextwife

Did you require the seller to obtain a mortgagors Jr. title policy, insuring the position of your mortgage? Like the first mortgage lender would normally require?

If so, contact the title company/closing agent and ask what gives. IT was their responsibility to be certain the documents were recorded correctly to protect the insured position.

No, unfortunately I didn't. I really would love to hear your opinions other than I was an idiot to not require mortgagor's insurance. *sigh* You too HomeGuru, JetX and SeniorJudge.

[nextwife]

Originally Posted by Warped

No, unfortunately I didn't. I really would love to hear your opinions other than I was an idiot to not require mortgagor's insurance. *sigh* You too HomeGuru, JetX and SeniorJudge.

So WHO did you close with and deliver the mortgage to to record?

Did they follow your closing instructions?

Did they fail in their compliance with your instructions regarding recordation?

Have you talked to your attorney, who worked with you on the closing, to ask if the title company erred in the order in which they recorded thew docs, or did you NOT make sure, at closing, that they took delivery of docs for recording?

[nextwife]

Originally Posted by Warped

....other than I was an idiot to not require mortgagor's insurance.

You, not I, stated this.

However, when one is NOT savvy about a particular business, and doesn't understand what the risks and pitfalls may be, they are best off paying some money to make certain that someone who DOES understand the "what could happen" side of things is looking out for them. If you yourself are not well-versed in real estate, you should NOT have treated a $65000 mortgage as a DIY project. Even RE professionals get their own attorneys for transactions like this.

JUst because one doesn't KNOW what risks exist doesn't mean there are none. Just because I don't know where the hidden utilities are in my yard doesn't mean that pretending there aren't any is a wise thing to do when I dig there.

Truth is, it's cheaper, and safer, to do it right in the first place, than skimp and create a problem that's harder to fix after the fact.

When I walk away from a closing, the lender has already provided a Letter of Instruction directing me to record docs in a certain order as a requirement of the closing. YOU were the "lender"- you needed to be proactive and have the title company assume responsibility to record per your instructions.

[seniorjudge]

1: Is recording the deeds in the manner that they did illegal and can I sue for damages as a result?

A: It would depend on what the deeds themselves say. E.g., is your lien called a second mortgage? Or is it just silent on that? It would also depend on what the written agreement was you had.


2: The buyer's attorney recorded the deeds. I have reason to believe that they did it in the manner listed above specifically for other than honorable reasons. Can I go after them legally?

A: You can't sue for being less than honorable. You will need to prove fraud. The order of the deeds looks (to an outsider) to be recorded in the correct sequence.


3: The president of the development firm recently had a 3 part column done about his business practices in the local newspaper. It doesn't look good for him. Can I go after him or his assetts?

A: If he has damaged you, you can go after him. Stand in line.


4: Will the $500.00 per day penalty for being late in paying me the principal ($65k) hold water in court? The developer signed the addendum to the contract for sale as well as a note (promissory note) stating that he would pay the penalty if he is late. That effectively makes it a legal, binding contract, does it not?

A: No one can tell you what will hold up in court or not. But ask your lawyer if there is such a thing as a vendor's lien in your state. If he hasn't heard of that, get a real estate lawyer who does know about such things.


5: If foreclosure does go through, what happens? Will that trigger the first lienholder to foreclose? What are the chances that I will get at least the principal ($65k) in full?

A: If your foreclosure goes through, you will get the land with all the liens senior to yours (i.e., those on the land before yours). I don't know what chances you have anywhere with anything. (Wish I did...I'd go to the casino!)


6: Since the lien is actually attached to the property itself, is the current owner, their "investor", now liable for it since he bought the houses presumably with the knowledge that there was a lien on both of them?

A: The lien is attached to the land and whoever owns the land will have to pay it off to get a clear title. Also check with your lawyer if a deficiency judgment would lie against the investor if you foreclosed and didn't get enough for your mortgage.