How You’re Secured in This Transaction

Protecting Your Equity: How You’re Secured in This Transaction

When selling on terms, it’s natural to want strong protection for your equity. Our structure gives you two layers of security without triggering problems with the bank.

1. Why We Can’t Record a Lien Immediately

Your current lender holds the first mortgage.

If we record a junior lien today, the lender could see this as a violation of their loan terms (due-on-sale clause).

That could cause the lender to accelerate the loan or foreclose, which would wipe out your equity and create unnecessary risk for both of us.

2. How We Secure You Instead

✔ Preferred Equity Position

Your remaining equity is documented in the Operating Agreement as Preferred Equity.

This means you are first in line for payments from cash flow or when the property is sold/refinanced.

✔ Executed Junior Deed of Trust (Held in Escrow)

At closing, we sign a junior deed of trust in your favor.

Instead of recording it immediately, you keep it in escrow (or in your possession).

If I ever default, you can record it right away—no delays, no permissions needed.

3. Your “Belt and Suspenders” Protection

Belt (Equity Rights): Guaranteed priority payout as a Preferred Equity holder.

Suspenders (Lien Rights): A signed junior deed of trust ready to record if needed.

Together, these give you the security of a lien plus the upside of equity participation, while keeping the bank comfortable so the deal works for everyone.

✅ You’re protected.

✅ The bank is not alarmed.

✅ The deal moves forward smoothly.

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