Catherine Bell and investors discuss a $4 million real estate deal where the seller wants to keep first-lien position. The risk: after the team funds, improves, and develops the property, the seller could foreclose and undo everything. The investor must hold first position with explicit protections for financing and exit strategies.
Are you in the deal room?
It sounds like they're focusing on maintaining the first position to protect their downside, which makes sense. From our side, the concern is making sure that we don't lock ourselves into a structure that limits our ability to execute, whether that's bringing in capital, repositioning, or exiting efficiently. So given that, I made a conclusion that we should and could accept the seller in first position, but negotiate very strict and clear flexibility around financing, operations, and exit. So we still have control.
Okay, so here's where, here's where it gets hairy, correct?
And that would be us?
No, no, it's the person we're raising that money with. The person with the money. Okay. Our investor wants first position for that $4 million.
So they would, they would want the first position, and then the seller would have to take the second?
Correct. And so in what we respond back to Dallin, it is going to be basically that We're not interested in any deal that has the seller in any kind of position where they can take away the property after we've done the work.
Okay.
And so we need to have a first position lien on the $4 million so that way after we get done doing entitlements or anything like that, that the seller cannot immediately invoke a position of superiority or dominance and take away the— and basically foreclose on us after we get all the work done. It'd be years to fight back and forth. Okay. Gotcha. So I'll just— And while they had it, they could still do all the work. Like they, they could literally move on with all— they wouldn't be able to— we would not be able to stop them from doing anything about it.
Is the property owned outright by the seller?
They don't have a loan on it or position on it. What are the chances that the seller could then come back and exercise first lien position and do a foreclosure, lis pendens, or any other action on the property that could forfeit or sacrifice all the work we've done to it?
