DEAL OR DUMPSTER FIRE?

Just because it’s legal doesn’t mean it’s to your best advantage, and that goes double in real estate.  One person’s deal can be another’s dumpster fire, and buyers are taking advantage of desperate situations.  Often the more desperate the sale, the more risky the offer.  Awareness and caution of risk can reduce real estate sacrifice, especially in these more “creative” offers.  

Deal or Dumpster Fire?

Sally Seller listed her home for $900,000.  Bobby Buyer agrees to pay and takes out a mortgage for $450,000 with a private loan, and then asks Sally Seller to hold a $450K mortgage for five years, with an option to extend another twelve months.  Bobby Buyer intends to rent the home for five or six years, and then sell it and pay off Sally Seller.  

Okay, that’s weird, but it could get the property sold quickly.  Remember, though, that’s only the best case scenario.  Sally Seller needs to peek around the corner and look at what other scenarios are cued up in case that one doesn’t work out.  

In five or six years if Bobby Buyer can’t sell the home for $900K, then he deeds the property back to Sally Seller.  So effectively Bobby Buyer has purchased a $900K property for half price, and had use of it—collecting six years of rent—only to deed it back to Sally Seller.  Ouch—that dumpster fire is hot!  

Sally Seller may be desperate, but she doesn’t have to sacrifice her real estate in a dumpster fire.  

If she understands the risk, she can take precautions, such as:

1. Use a local title company, one that will watch out for Sally at the beginning, and work with her if the scenario slips sideways.  A local title company is vested in the community, and not just the closing.  

2. Know the terms of the first mortgage before agreeing to the deal.  Is there a domino effect if the first mortgage defaults?  Where does Sally hold fiduciary responsibility?

3. Include a cross-default clause.  Make sure Sally Seller with the second mortgage has the benefit of the default provisions that are in the first mortgage.  

When a deal dressed in a fancy pamphlet steps outside what is normal and customary, you don’t necessarily have to walk away, but you do need to look beyond the best case scenario so that you are aware of the risk, and can appropriately address that risk.  

From Land Title Talk Podcast

July 30, 2025

Written by Stephen Collins and CJ Godwin