Need help. I am trying to buy a house for my personal residence from an owner who built four of them as an investment. As you know the market has crashed and the value has dropped. Purchase price is 475k on 5 acres here in CA…3100 sq feet.
Here is the crux of my problem…coming out of a divorce with nothing and desperately needing a tax write off and knowing that I will have to file a BK sometime in the next 6-12 mo. I have been very honest and upfront with the seller about my impending bk and my reasons for doing so.
His major concern is the Due on Sale clause. I have attempted to re-assure him based on the information here of the unlikelihood that a bank would actually accelerate a performing loan in light of the current real estate crisis along with the lowering interest rates. He seems unwilling to record a deed in fear of the Due on Sale clause and the bank being notified of the recording. Of course I am worried about protecting myself down the road in proving that I am the owner and that I can claim the tax write off.
His latest suggestion was for us to form a LLC with us being partners and the house placed in the LLC. I have never heard of this so I don’t know if this is even possible…on the surface I think this exposes him to my pending BK which would be bad and I am not sure I can claim the tax write-off this way.
I don’t know if a land trust is legal here in California.
Any suggestions on how to protect him and myself and get him past this last objection??
My suggestion would be to get your world in order before buying your house… READ a lot more about subject to investing, once you understand S2 better find a house and buy it… There will be plenty of opportunity…
Thank you both for your replies. Michael, I do respect your opinion very much and do wonder if I am going to fast but taxes are killing me and I have a real fear post bankruptcy of my ability to get a house…I suppose that is why I am pushing so hard for it.
John, it was the seller who brought up the due on sale clause…also stated that his title company would not record the deed under these circumstances?? BTW, I am strongly considering the purchase of your course but am fearful if this is doable her in CA with such high land prices.
Personally I have not found anywhere that Sub 2 investing does not work, let me give you an example.
I was investing in Las Vegas in the 90’s when the market crashed in California, At that time I was advertising in the local paper “I Buy Houses” and since the majority of visitors were from California many of them saw my ads. They would call and tell me their woes and asked me to help them. “A little while ago I paid $300K for my house and owe $150K, which is what you can have the house for.”
Should have taken everyone of those houses on Sub 2 because they went up in value to about $900K in a few years, I kept tract, should not have because it gets me dizzy just thinking about what could have been.
You do not need a title company when doing a Sub 2 deal, except for doing a title search, when you find a clean title, you immediately record the deed. Now when you find a seller that needs comfort in selling, just close at your local bank, because all you need is a Notary and an atmosphere of credibility.
Now the reason for the sellers rejection, you did not answer all Questions before they became Objections. You did not explain the benefits of the loan staying in place for everyone’s protection and in the script I use this is covered very well, so it does not become an Objection.
Basically it boils down to building trust where the seller feels comfortable doing business with you from the very beginning.
Ken… Listen to John… And Spend some money would ya! Besides you need the tax deduction.
Only thing I would add is to make certain you use an agreement which is California Specific… And dont create a deed restriction by indicating a date which you will pay off the S2 loan or indicate that you will pay it off at transfer.
As for title companies… It isn’t that you havent found the correct title company it is that you havent found the correct escrow officer. If you plan on being an Investor a good escrow officer is gold…