Beginner needs Sub2 help

Hello Everyone:

I was wondering if I could pick your brains… I am interested in working a subject 2 deal, and I have a few questions.

when the deed is recorded into my name, will the mortgage automatically become due on demand?

if so, what else can I do if I do not have all of the money to payoff the mortgage?

when the deed is transfered, do I need to pay taxes?

is using a land contract a better option? will this help in avoiding transfer taxes?

thanks,

Frank

The mortgage will not automatically become due on demand. If the Due on Sale clause is exercized, supposedly you have a few months to pay the loan balance off. Before then, you can sell the house, refinance the loan, or get a get some tenant-buyers in the home with a lease option purchase of the home.

thank you for your reply. Another question, it is possible to refi a property that you purchase sub2? if so that would satisfy the origanal sellers mortgage right?

Correct.

have you done this before???

if so, how…

thanks

I haven’t done this before. However, one of the payment options on your contract probably mentions taking over the existing financing. You can then get the seller(s) to sign a Quit Claim or Warranty deed which gives you their house. Take the contract and the deed to a Title company to close the deal.

I would seek out advice from someone who has actually done Sub2 deals.

Frank,

First off, why would you record the deed in your name? Set up an entity and close in the name of the entity. Protect yourself.

Unless the bank heavily searches for deed transfers where they could call the loan due, you are cool. Banks are in the business to make money, not take back homes. If you pay the mortgage, they love you. Just do change of address and have mtg. payments go to your home.

You will need to check with your local area regarding closing costs for deed transfers.

What is your exit strategy, if you can’t find a renter and you can’t pay the mortgage? You need to protect the seller to. Stay reputable.

As long as your credit is good, and you have held title at least 90 days it should be ok refinancing in your name if your credit an income is good.

Question, why would you want to refi it in your name? The point of doing a subject to is to keep debt out of your name. If the owner really needs you to take it of his hands, he shouldnt have a problem with you keeping the loan in his name, as long as you make payments.

Frank,
Rather than re-type a rather lengthy post, I’ll just give you a link to another one here I made some time ago that might help.

Check this out:
http://www.reiclub.com/forums/index.php/topic,9019.msg39355.html#msg39355

The basic run down of a subject to, the mechanics of it anyway.
As with any investment, the numbers make the difference, always make sure, no matter how you buy, that you buy for WELL below TODAYS value.

hey jim i checked out that link you posted. are you using Gatten’s, Bronchick or Warda’s trust system?

defcon,
I use my own.
Have read the ones you mentioned, don’t like one of them…the other two, good systems.
Warda has good info, and Bronchick is top notch as well.
Take care,
Jim FL

when the deed is recorded into my name, will the mortgage automatically become due on demand?

if so, what else can I do if I do not have all of the money to payoff the mortgage?

when the deed is transfered, do I need to pay taxes?

is using a land contract a better option? will this help in avoiding transfer taxes?

AKASH,
Please do a search here for ‘due on sale’. You will learn quickly, this is a non-issue.

You either sell, or refi, and if you cannot, then you should not buy in the first place. They key to minimizing risk, is to buy right in the first place.
Bying for well below TODAYS value is a must.

This depends on location. In some states, yes, in others, no. It’s a local thing.

Nope, land contract will have recording fees, etc as well…and the seller will still be involved. Always better in my opinion, to take title, and be done with it, now.

HTH,
Jim FL