financing secrets of a millionaire real estate investor.pdf

16 FINANCING SECRETS OF A MILLIONAIRE REAL ESTATE INVESTOR
In addition, the county, city, and/or state may assess a transfer tax
based on either the value of the property or the mortgage amount.
A deed or other conveyance does not have to be recorded to be
a valid transfer of an interest. For example, what happens if John gives
title to Mary, then he gives it again to Fred, and Fred records first
What happens if John gives a mortgage to ABC Savings and Loan, but
the mortgage is not filed for six months, and then John immediately
borrows from another lender who records its mortgage first Who
wins and loses in these scenarios
Most states follow a “race-notice” rule, meaning that the first person
to record his document, wins, so long as
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• he received title in good faith,
• he paid value, and
• he had no notice of a prior transfer.
Example: John buys a home and, in so doing, borrows
$75,000 from ABC Savings Bank. John signs a promissory
note and a mortgage pledging his home as collateral. Because
ABC messes up the paperwork, the mortgage does not get recorded
for 18 months. In the interim, John borrows $12,000
from The Money Store, for which he gives a mortgage as collateral.
The Money Store records its mortgage, unaware of
John’s unrecorded first mortgage to ABC. The Money Store
will now have a first mortgage on the property.
Priority of Liens
Liens, like deeds, are “first in time, first in line.” Thus, if a property
is owned free and clear, a mortgage recorded will be a first mortgage.
A mortgage recorded thereafter will be a second mortgage
(sometimes called a junior mortgage because its lien position is behind
the first mortgage). Likewise, any judgments or other liens recorded
later are also junior liens. Holding a first mortgage is a desirable