What happens if a builder defaults on their mortgage after they’ve built new houses? Whose property are the houses?

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What happens if a builder defaults on their mortgage after they’ve built new houses? Whose property are the houses?

Builder is purchasing property from us- private owners- for $550,000, 75K down, & 5K month for a year, then must pay balance. They have acquired sub-div permits, etc. They plan to knock down 2 old homes, and build 4 new. If value of homes is $2 mil, & they default, & we look to foreclose, what happens to new construction? Can they claim we owe them $1.5Mil? Deal is risky to begin with, but maybe only deal we can get in current market. How do we absolutely protect ourselves?

Asked on June 23, 2009 under Real Estate Law, New York

Answers:

Steven Malone

Answered 12 years ago | Contributor

You need a good lawyer to see that the land is broken down into the approved lots and that a price for release from your mortgage is incorporated into the mortgage that is given to you.  Each time that the builder wants to sell a lot, a release from you will have to be obtained.


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