MANGMT 3540 1st Edition Lecture 22 Outline of Last Lecture I. Process of Sale of LandII. DeedsIII. Types of Ownership InterestsOutline of Current LectureI. Assuring Good TitleII. Real Estate Financing III. Mortgage OptionsIV. DefaultV. Priorities of Mortgages/Deeds Current LectureI. Assuring Good TitleA. Abstract of Title and title opinioni. Abstract a summary of transactions pertaining to the land since title came from the governmentii. Title opinion a lawyer’s opinion on marketability of the title after examining the abstractB. Title insurancei. Insurance company guarantees good titleii. Check exclusions carefullyThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.II. Real Estate Financing A. Partiesi. Mortgagor transfer a mortgage (borrower)ii. Mortgagee receives and holds a mortgage (lender)B. Historyi. Title theory title and possession in mortgageeii. Lien theory title and possession in mortgagorIII. Mortgage OptionsA. Selection of Financing Vehicle (3 options)i. Cash on closing with mortgage, installment land contract, or lease with option to buyB. Types of Financing instrumentsi. Mortgage- a lien on real estate where the holder (mortgagee) personally exercises foreclosure rightsii. Deed of Trust- a lien on real estate where a third part, the trustee, exercises foreclosure rights on behalf of the holderiii. Requirements for a valid mortgage signed, notarized, delivered writing just as with deeds C. Open-end Mortgage (line of credit)i. Mortgage secures future advancesii. Example: home equity line of creditD. Second Mortgagei. Lower in priority and usually later in time than the firstii. May also have a 3rd or fourth mortgage, etc.E. Five types of clauses in mortgagesi. Acceleration clause: allows declaration that the entire balance of the loan is due if there is a default on a loanii. Due on sale clause: allows acceleration if an interest in land is soldiii. Power of sale clause: allows a private foreclosure auction (nonjudicial foreclosureno court hearing)iv. Points: loan origination fees where one point equals one percent of the loan amountv. Prepayment privileges: allows early payment without penalty typical unless borrower pays no points or has bad creditIV. DefaultA. Creditor’s rightsi. Accelerationii. Private or judicial foreclosureiii. Deficiency judgment (balance after foreclosure- limited in some states)B. Debtor’s rightsi. Statutory notice of foreclosure saleii. Equity of Redemption—right to repurchase the real estate prior to foreclosure (by paying the entire balance due to mortgagee)iii. Statutory Redemption—right to repurchase after foreclosure1. Example: some states: one year right to redeem after foreclosure sale; similar rule for tax lien sales in Missouri2. Statutory redemption is very limited in Missouri. The right applies only if the bank purchases the property as its own foreclosure sale, and the mortgagor gives notice and posts a bond. V. Priorities of Mortgages/DeedsA. Race Statutei. First to record mortgage or deed wins1. Race to the courthouse2. Record with the county recorder of deeds where land is locatedB. Notice Statutei. One who has notice of another’s interest prior to receiving an interest in the land cannot defeat the other’s interestii. A good faith purchaser for value, who takes title without notice of prior interest in the real estate, takes free of prior interests because he is damaged by the prior holder’s failure to provide noticeiii. Recording is the main way to provide noticeC. Notice-Racei. First to record after taking her interest without notice of another’s interest winsii. This is the Missouri
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