First of all I feel a moral and ethical responsibility to make sure the payments are made and on time on any Sub 2 deal I do. Also I do not take properties Subject To just to see if I can sell it, I know I can sell it when I purchase it or I do not buy it.
Every house I have purchased using the Sub 2 method of investing the Seller had to convince me to purchase their house, no exceptions. Always remember you are the Buyer, the one with the cash to purchase the house, albeit U-haul money.
I use a Buy Offer & Acceptance Agreement, within this Agreement it says I am purchasing the property Subject To the existing financing staying in place. Very simple no CYA letters that if you had to go to court the Sellers attorney can start picking apart and cause more problems than they are worth.
Anytime you purchase a house, car, etc., that is financed the lender has the option to repossess the item, should you not pay. No need to sue you for the return of the item as your contract will specify, no pay, no keep the item and the item is returned to the lender by legal methods involved.
Would the seller sue? We all know you can sue anyone for anything, however, since you returned the property, then what would the seller base the lawsuit on? The agreement you signed is no different than the one you sign when you purchase any item on time payments.
If you cannot pay for the Sub 2 house, then sign the Deed back over to the original owner. After all this is really no different than legally having it repossessed by the lender, in this case consider the seller as the lender and instead of going through court procedures you are voluntarily returning the property.
A while back a Seller sued me for the return of his house. The reason being the property values appreciated in the double digits. A far cry from when he was begging me to purchase his house because he could not afford the payments at that time. The Judge asked only one question “Whose name is the Deed in?” Where upon I presented a copy of the Deed in my company’s name, Case dismissed…
Because of the current market conditions, use caution when purchasing, do not take a deal just to take the deal. Do your homework using Demographics to make sure it is a wise decision. Not many investors saw the de-appreciation coming, in some areas the houses dropped up to 50% of value and if you owned one as a Sub 2 investor, chances are neither you nor the seller really wants the house.
John $Cash$ Locke
PS: I do not use and Attorney or Title company to close a Subject To deal when buying, I always check for liens and/or encumbrances, then if title is clear go ahead with the deal. I have closed deals at Taco Bell, My bank and even one time on the hood of a Mercedes. I use an Attorney or Title Company when my Buyer refinances and have never had a problem with my paperwork that my Seller and I signed.