Sample construction loan subordination letter

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Notice to Subordinator
Re: Escrow ######


Dear subordinator ,

I have tentatively approved a $###,###.##  first loan for borrower  on the property located at address  to finance a portion of the funds necessary to construct a #### square foot home.

Much of the money will be "doled" out in predefined draws as the work progresses, as per the attached sample loan draw agreement. We do not have a voucher system.

I'm sure that you are a cautious investor, however I feel it my responsibility to take this time to repeat that subordination can be risky. If we are forced to file a Notice of Default against this borrower at any time, the balance of any remaining construction funds held could be used as a principal payment to reduce our loan balance. In that case, the remainder of our loan as well as any interest due, accumulated late fees, default fees, etc., will stay against the property in first position ahead of your loan. If the borrower fails to cure a default, you as the junior lien holder, in order to foreclose and protect your interest, would need to assume full responsibility for our loan.

Also, in order to qualify for and obtain this construction loan from Brad Evans Real Estate Loans (funded by private investors) the borrower is not obliged to meet the criteria a bank or other conventional lender would require. The subject loan was approved primarily on the real estate equity, all or part of which in this case is being provided by you.

Sincerely,

Brad Evans

P.S. For more information on this topic take a look at "What the Heck is Subordination"