using another property as collateral when seller takes 2nd

hi everyone,

i have a 12 unit where im assuming the existing financing and the seller is holding the balance. i say balance not 2nd since the bank holding the first wont allow a 2nd. so we are using a bill of sale basically a personal loan. i offered to use another property in town i own as collateral.

my question is, is this recorded anywhere, such as a lien on the title on that property. or is it just paperwork between the two parties.

were siging a promissary note too. the property is in new york state.

ive passed this question onto my lawyer today as well, but he wont be back in town till friday, so wouldnt mind to hear what other investors have done in a similiar situation.


The seller should record this lien on the secondary property to establish his priority in the public record.

If the 1st lien holder will not allow for a second, you should record it in your mind…because it is a mere memory, unless you want to commit mortgage fraud (what you are suggesting is called a silent second and it is pure fraud).


Scott Miller

thanks everyone…

learned something new. the solution the seller, myself and our lawyer agreed on was to put the deed of another property i own in the sellers name held in escrow till payment is satisfied. this way the sellers interest is secured and if i default the seller can file for the deed. of course we also sign a promissary note.

this way no one is commiting mortgage fraud. whew…

Does the lender who’s mortgage you are assuming know that you are financing the deal 100%? This might be where the potential fraud resides.

From what I have read commercial loans do not have due on sale clauses; so doing this loan as a wrap should not be a problem.