What is likely to occur when a property is sold in a tight money market with an existing loan containing an alienation clause?

In a tight money market, obtaining financing can be challenging due to higher interest rates or stricter lending requirements. When a property has an existing loan with an alienation clause, this clause typically requires the borrower to pay off the outstanding loan balance in full upon the sale of the property if the existing loan cannot be assumed by the buyer.

In this scenario, the most plausible outcome is that the buyer will need to secure new financing for the purchase. This is often necessary for the buyer to complete the transaction since they typically cannot take over the existing loan due to the alienation clause. Additionally, in a tight money market, buyers may be more inclined to explore various financing options available to them, even if it involves higher costs, to acquire the property.

While it’s possible that a seller might choose to pay off the loan themselves to facilitate the sale or that the property could be sold for cash in certain situations, these outcomes are less likely in a tight money market setting where financing is generally more difficult to obtain.