I like to ask a small question. In a scenario you find a good Pre-foreclosure deal. Is it always possible to assume the loan the original owner had on his/her name? What would other methods to pay (other then cash) in order to get the property in minimum time before they go on auction.
Regards…newbie
Howdy Amoda1:
Some loans are not assumable no matter what. Some loans are assumable with the buyer having to qualify with the bank. It should be easier to get the lender let you assume the loan if iy is in default but not always. They do not want to jump from one defaulting borrower to another.
In the past there were a lot of VA and FHA loans that were assumable without qualifying but most of these are now gone.
Another way is to buy the property subject to the loan where the loan stays in the sellers name and you agree to make the payments. There are a lot of posts here in this forum about sub2 deals. About the worst that could happen is you are forced to pay off the loan or do an assumption if possible.
could someone explain how this works. doing it properly that is.
John
Can you please describe why this is a good deal?
There are many ways to make money in pre-foreclosure activities. You can negotiate a short sell, buy the notes at huge discounts, help them to refinance (don’t need to do it yourself),… All of these do not invlove get the house into your hand. Of couse, you can assume the loan as well.
I’m not saying it is necessarily a ‘good’ deal… I am saying it is an idea we had before we knew about SS -(which I am still learning about) I like the wrap idea because I don’t have to deal with a bank & it can be real quick - min. hassel
One solution is to purchase the home “subject to” the existing mortgage.
Have the property deeded into a Land Trust “Family Trust of John Doe Seller” with yourself as beneficiary and joint trustee with the Seller.
Have them also sign Trustee resignation letter for later.
As trustee “cure” the foreclosure by paying off the default.
Now you own the home in the trust but it appears to the bank that the Seller’ still owns the house which is good as not to trigger the “due on sale” clause.
And the loan is still under seller’s name.
Filing new deed will not yet trigger transfer sales tax as long as fomer seller appears to be a Trustee. When you file the resignation, ir could trigger transfer tax.
Aloha
Weird- after i finished a bunch of reading I was going to post a similar thing
I think i am finaly understanding what subject 2 is & since in the beginning we will be turning around & selling asap a subject ro would work well if we are not ready to do a short sale
With all due respect to esther, DO NOT try to fool the bank and hide anything.
All loans are assumable using a land trust. But, DO NOT make yourself or the Seller Trustee and DO NOT have the seller sign over all of his/her beneficiary interest. It is the seller’s family trust. Have the seller remain as a 10% beneficiary and appoint an independent Trustee (I use a non-profit corporation).
The Trustee takes legal and equitable title to the property and you and the Seller are beneficiaries. Land trusts are beneficiary directed which means the Trustee does what you tell him to do. The deed is recorded. All transactions within the trust are legally unrecorded.
DO NOT HIDE ANYTHING. When I acquire a house subject to I often advise the bank after I have done so. Thanks to Garn-St. Germain it is perfectly legal.
I then triple net lease the property. My leases are 2 years, 11 months and 29 days to be in compliance with the law. At termination, the seller gets paid what he/she is due and your Lessee/Resident Beneficiary refis or sells , and the trust is terminated. In this scenario, you the Investor has NO legal responsibility for anything.
Again, DO NOT do anything that appears underhanded, especially naming the seller and yourself trustee and then having the seller sign his interest to you. This is the kind of shenanigans that get people into big trouble. The seller can come back and say he was intimated, confused, etc. It is not necessary, not smart, and you will be flirting with fraud.
All loans are assumable if done properly and legally as I described. Best of luck to you.
They way I do it is.
I use a land trust
Put the property in “Seller Family Trust”
Make the trustee someone YOU trust. It could be your aunt who lives on the beach. Of course when you go have a meeting with your trustee once or twice a year it is a tax write off. 8)
Have the seller sign the beneficial rights over to your LLC.
I pay the taxes and I get the tax write offs
Then L/O
If this is a preforeclosure you will need to catch up on all the past payments and the other bills that have incurred.
That is why I prefer Sub/2s with homes that are 2 to 5 years old and have the seller pay me to take the house.
;D
Bruce
I agree completely, DON’T TRY TO HIDE ANYTHING. There is enough money to be made being open and honest without going that direction.
I purchased a pre-foreclosure last month, the loan amount due was $59k, I had the home appraised and it came back at $120k. I met with the owners and made an agreement with them, paying them $1k now and $7k after the property sells. I gave myself 18 months to sell the house and made the deal subject too the bank agreeing to it. I supplied the owners with Quit Claim Form, Power of Attorney Form and Permission to Release Information Form and asked them to have these notorized and drop them off to me. Having the sellers / owners take the forms to be notorized generally gets you out of the; “He confused and intimidated me into doing this”.
I then took these forms to the bank and sat down in front of the loan officer handling this mortgage. The loan was $5k behind in payments (this is included in the $59k due) and the loan officer agreed to accept a check from me for $1k and gave me the same 18 months to pay off the loan before moving forward with the foreclosure. I of course agreed to continue to make the monthly payments. I supplied the banker with copies of the paperwork signed by the sellers, but didn’t sign anything myself.
Just one way your situation may work.
Enjoy your day,
Ray Rochefort
Managing Member
Purpose Investments LLC