Back payments and Sub2

Hi - I was wondering what the deal is with making back payments when taking a prop. SUB2.
I have read that I am supposed to bring the loan current after I get the deed. But, I have also read, contrarily that I should no bring the loan current until I close on the home with my end-buyer.

  1. Will the bank allow me to continue making payments, if I still owe back payments and fees?
  2. What happens if they call the loan due, and I brought the loan current with several thousand dollars? Assuming that it doesn’t make sense to Refi, Do I just lose my $?
  3. I also read that I should also only pay them for their equity (if this is part of the agreement) after the home is sold to my end buyer - what do you think … do sellers agree to this?
    Thanks for your help, Juliet

Are you asking for personal opinions? you heard both sides and you need to choose what you feel you are comfortable with.

Everything is negotiable, if you do not plan to make the back payments I would absolutely make it clear and get a disclosure signed or risk being sued. I can tell you though, if you try to force this method on all your transactions, you risk losing most of your deals.

If bank calls loan due, you need to refi (if you have not sold it yet) or let the house go into foreclosure. What you paid is lost. Thats the cost of doing business. You cannot expect to make thousands of dollars without risking something :slight_smile:

As far as paying their equity, that too is negotiable. Some willing to wait, some some up front, others want all their cash.

Yes, I am looking for personal opinions on which is the right way to go. I want to get more information on the topic before I decide which way to. What do you do fadi? Thanks!

I always make back payments and make sure payments are current. As far as their equity, I never had to give anyone more than $1500 for their equity except this last deal where they get $4000 when my end buyer refinance down the road. Since I go after pretty houses they usually don’t have much equity.

The few that had lots of equity they were not flexible on getting their funds later. One of them I walked away from (wanted $40k) and one right now I am buying out right and getting a loan (he wanted $40k for his equity, I gave him $27k but buying the house at 60% ARV).

It is all negotiable, I don’t use one template and force it on all transactions. I adapt my method depending on what the client wants/situation.

Got it, Thanks!