What are the actual costs of Sub2 transaction? I know closing costs will vary state to state but what needs to be paid other than money seller gets? Also, who is doing tabletop closings and who is closing with attorney?
I do Sub2 table closings. The costs are simple, what ever it takes to record the deed could be your only cost. It may be a good idea to buy title insurance and your own separate hazard insurance policy but that will be up to you and your comfort level. I do my own title searches and add myself to the seller’s insurance policy because I am cheap. You may need to pay to have a notary there if you don’t know one.
Good luck
Kevin
Low cost is the beauty of subject to purchases. I always take my properties in the form of land trusts which helps to avoid both seasoning issues and potential transfer taxes. In addition I always get a new insurance policy as the current owner usually has a standard homeowners policy and not a vacant home policy. So far I have wasted a bunch of money on insurance but if God forbid someting did happen I am covered. This is especially true if you are spending money to rehab.
However, there is no reason to do anything other than a table close. I do not do my own title searches. We do a preliminary pencil search before we buy but I have my title company review title and give me a commitment so I can besure there are no skeletons in the closet. That way when we resell they only have to update title. It costs about $75 but it is money well spent.
Good luck and have a Happy and Prosperous New Year
What is a tabletop closing? LIke the kitchen table? That makes sense.
So marketingmaster, once you have settled with the seller on a subject2 contract you have them deed the property to you via a land trust?
Are there seperate forms for subject 2?
Thanks
JD
Interesting points marketingmaster
Let me start by saying I hate having to buy a title insurance policy…
I rarely take a deed at the “Table”. Mainly because I want a third party as part of the transaction so the seller can never claim I did this or that. Especially if they can be included in the elder abuse laws or if the seller is a minority and can claim they didn’t know what they were signing.
But the main reason is that I am buying a ton of equity and the cost of a title policy and policy binder is marginal compared to the loss if there was a skeleton. After all when you resell you’re going to buy the policy at that time and if buying a binder the cost difference doesn’t justify not buying the policy in the beginning. The binder cost 10 percent more and you only pay insurance on the difference at resell so 10 percent on a 1200 policy just isn’t worth it to me.
I had a seller have a 3 million dollar Home Land Security Lien against her… I’m glad I had an insurance company doing their job.
But I would agree that if you do your due diligence and aren’t buying a lot of equity or if you have a stable seller who doesn’t have a “Common” name then you may be fine going without insurance.
All of the Juan Gracias scare me too much.
If Investors don’t buy title insurance in the beginning make certain that you create a contingency that the resell contract is contingent on the seller’s ability to buy a title policy with liens not to exceed an amount or the investor may have to come to the table with money to close.
Michael Quarles
Close with attorney or title company. It is just the cost of doing business. Plus it will ad so much legitmacey to the transcation. I have done several closings at my office, at there home etc.
Train your title company. I am in the process of looking for a new ones these days. But if all else fails. Close at your office or there home.
Kevin,
You may want to consult your insurance carrier. Adding yourself to the former owner’s homeowners policy does nothing for you in my opinion. First, you have the deed, so the former owner no longer has any insurable interest in the property. Any claim against that policy would be denied. Second, since the property is no longer a primary residence, the property is not being used for the purpose covered by the homeowner’s policy. Again, any claim against that policy would be denied.
Better to get your own hazard insurance policy. At least you will have some coverage in the event of a catastrophic loss.