One of these issues is cognovits. The odds are pretty good that you will encounter these at some point during your investment career, but you may not be aware of what they are and their function in a real estate transaction.
It is important to note that cognovits will only ever become an issue in commercial transactions, so those of you who are dealing with private and personal properties will likely never have to worry about them or what they could mean for a transaction.
The cognovit provision basically allows a loan creditor to take a judgement, whatever that may be, against a borrower. It usually arises if the borrower has failed to pay back the money they owe to a creditor in some form.
Upon the borrower’s default, cognovits allow the judgement to be made without the creditor having to spend time and money on other legal proceedings to claim back the property they provided the loan for. It also means that the creditor is able to take away the risk of a lawsuit for taking back a property that they are owed money for that the borrower is unable to pay.
In most real estate transactions you will …Read More