Real Estate Law
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You are saying that the builder is building four homes for a budgeted profit of $40,000 per house. That would be a total of $160,000 profit. However, one of the homes is to be sold to the lender for only $80,000 which means that on that one home the builder will lose $120,000. The remaining three homes, selling at $40,000 profit each returns $120,000 total. The builder's net profit/loss is zero. I don't know why any sane lender or contractor would do a deal like that; however, if you wish I'll do a few minutes worth of research on the topic if that's what you want.
Okay. Lender buys the house for $160 K, sells it for $240 K. Net Profit $80,000. Contractor makes $140,000 on three homes, but loses $40,000 on the one sold to lender. Contractor' s net profit $100,000. So the prophet does not quite come out equal. Equity clogging is not a legal doctrine or rule. Equity of redemption simply refers to the right to repurchase a property that has been foreclosed on. The contractor's ability to pay off the mortgage at any time will not affect the bank's equity position in the one house. The law is very clear everywhere that provisions in mortgages that attempt to negate the borrower's statutory right of redemption (called equity clogging) are void. But in your fact situation, equity clogging is not an issue to begin with.
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I must respectfully ***** ***** spend any more time on this issue, especially since you are asking for extremely detailed case law documentation which would require hours of research time. I look wish you best of luck in finding an answer that suits you, and I will opt out of this thread.
Perhaps this may shed some light on the subject; however, I am not going to read it yet, and I notice that it stops on p 5, and there is more to it, including a conclusion. http://files.ali-cle.org/thumbs/datastorage/skoobesruoc/source/CR047_12--Murray,%20J--Deeds%20in%20Escrow%20-%20March%2003_thumb.pdf
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Please support your answer with reference to CO case law.
That requires a CO lawyer with CO case law data base. It also requires, the
exact loan document. Otherwise you can't tell an option agreement from an fee. One word in the right/wrong place change everything. It would be quite expensive and can't be done from here. Thanks for coming back. I'll take what's offered at this point.