Question: Does the commercial purchase-money loan exist?
Answer: There is no such thing as a commercial purchase-money loan (without it containing an exculpatory clause). Purchase-money loans are anti-deficiency (nonrecourse) loans limited to funding the purchase of a buyer-occupied, one-to-four unit residential property – not other types of properties or non-occupying residential buyers – and seller carryback arrangements on any type of real estate.
Under a “purchase-money” loan, a deficiency in the value of its security is not collectible. Purchase money should not be viewed as purchase-assist financing, though it is, since purchase-assist financing includes the funding of the purchase of any type of real estate, not just one-to-four unit residential properties which are to be owner-occupied.
first tuesday’s recently published Recent Case Decision (RCD) titled Bank of America v. Stonehaven Manor addresses the enforcement of a guarantee agreement even though it is secured by a trust deed on real estate.
For additional reading concerning how a nonrecourse note held by a lender or carryback seller becomes recourse paper through later agreements with the property owner, see first tuesday’s Real Estate Finance, Sixth Edition Chapter 44: Converting nonrecourse paper into recourse paper.