I am buying a home from someone who owns the home but is paying on the property....i make one payment to her

Asked by Heather Madison, Niederwald, TX Fri Dec 12, 2008

for both.....would the person she is paying for the property be the superior lien holder and her the inferior lien holder? i am unsure what a superior lien holder is .....
heather madison

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Ron Thomas, Agent, Fresno, CA
Fri Jun 14, 2013
Com' on!
This is FIVE YEARS OLD!!!!!!

Why resurect it?
1 vote
S. Tony Pach…, Home Buyer, Austin, TX
Fri Jun 14, 2013
I believe that is the first lien holder. They get paid first before anyone else at the sale of the home.
0 votes
T.E. & Naima…, Agent, Dallas, TX
Sat Dec 13, 2008
The precedence of liens is according to their filing. The first lien is superior because it was filed first.

Some exceptions to this rule apply. Taxes are the most superior lien, even though they can be filed after a mortgage note. Even if you buy a home in foreclosure, the tax lien, if any, is superior and goes with the property. A homeowners' association has the next position after taxes. Their covenants are filed prior to sale of the property to the first homeowner, usually. However, the lien created by a HOA is often subordinated to what we call the first mortgage.

When you buy a house, the 80% or greater mortgage note is recorded first, making it the first lien. In order to assure its position as higher than the HOA's dues liens, the covenants normally contain a clause that places their lien behind the mortgage. In foreclosure the subordination clause wipes out the HOA lien when the first mortgage is foreclosed. A foreclosure does not wipe out tax liens.

It sounds like you are purchasing the home in a wrap transaction, where the last owner still has a mortgage payment to make, but you are paying her a little more to cover that mortgage payment plus some to cover the difference between the mortgage balance and what you bought it for.

There is some risk that she may fail to make the payment to her mortgage company. You should check with her to make sure she is keeping up with those payments.

The Seller Financing addendum refers to a superior lienholder and in this case means the old owner's mortgage company (the note that is being wrapped). Many people buying like you pay the actual mortgage payment in check form delivered to the old owner, who in turn pays it to the mortgage company, but they also include a separate check to the old owner each month for the remainder principal & interest in seller financing. In this way the old owner cannot cash the check and not pay the wrapped mortgage off, but both parties can verify that the old mortgage is being paid.

Most mortgages contain a Due on Sale clause that is the source of some risk to you. If the old mortgage company has such a clause in its mortgage note with the old owner, they can accelerate the note and require her to pay it off immediately if she transfers title to someone else (which it sounds like she has, to you). Most lenders will not invoke this clause so long as payments are made on time and no one rubs their noses in it. Calling the old mortgage company would be rubbing their noses in it. Any proof you want should be obtained directly from the old owner that she is paying properly.

If you have concerns, you should consult a real estate attorney.

We don't use the term inferior, but her note is subordinate to the superior note held by the old mortgage company. Mechanics liens from people who work on the property or other notes that you might have caused are after her note -- so they are even more "inferior". Just remember taxes are always superior liens, and her old mortgage note is superior to your note with her.
Web Reference:  http://www.SumnerRealty.com
0 votes
Dallas Texas, Agent, Dallas, TN
Sat Dec 13, 2008
Question needs clarity HOWEVER I will make attempts OR contact my office 972-699-9111

If the bank owns the property no matter who is making the payments is the superior lien holder to the property, if there is a 2nd lien they also have rights to the property. County annual liens till taxes for that year paid in full.

If lease purchase it depends on how the contract is author in most instances leaves the person who is making the payments at risk .
Web Reference:  http://www.lynn911.com
0 votes
Bruce Lynn, Agent, Coppell, TX
Fri Dec 12, 2008

I don't understand the question exactly, but it sounds like you have attempted to purchase a property with a lien on it? Chances are you need your family attorney to take a look at this. It doesn't sound good to me. There can be all kinds of liens on one property. The superior lien is one that has the right to foreclose and above all others and can wipe out any other liens. Sometimes this is a 1st mortgage. From what I understand of your question the person you are paying is likely not a lienholder at all. I strongly suggest you get your attorney to take a look at this transaction for you to protect your interests.
0 votes
Sj209, Both Buyer And Seller, California
Fri Dec 12, 2008
This sounds like a bad idea. If I understand your question correctly, you have entered into an agreement where you pay monies to a party who in turn is making payments on the same property to a lender or servicer. If so, this is a very risky transaction. To answer your question, the superior lien holder is the party holding the 1st note which would be the primary lender not the party you are currently paying. Tax liens are superior, of course, if applicable. See the links for more info regarding superior lien holders:

0 votes
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