Need help with first deal!

General Real Estate Investing
1

Hello Gang;

I have my first Sub2 deal - possibly! What forms or contracts are needed to secure my ownership of the house and to notify the Lender that I will be taking over payments?

Thanks.

2

I personally do not inform the lender I’m taking over. This will invoke their "due on sale clause
". Unless the lender allows for assumptions then I would keep this under your hat. Even if they do allow assumption of the loan, you would have to pay fees and qualify. The reason you do subject to is to keep fees low and get the deal done without having to qualify (also works well when you are flipping/assigning the contract). It’s legal to do subject to and keep the lender in the dark in CA, check the laws in your state. But since it is a contractual issue with the current lender and original borrower and not a legal issue you can just keep it to yourself. You don’t want to do this too long because you do risk foreclosure by the existing lender if they do find out. So take it subject to, then refinance or sell it ASAP.

:bobble

3

I have to disagree with Jason. There is no need to re-fi as soon as possible nor is there any reason the bank would foreclose on you unless you simply stop making payments, which you won’t do, right?

Jason…you are telling us that if the lender finds out they will foreclose on you? Huh? Why in the world would they do that? They want their money and with all the bad performing loans out there, they would love to have a loan paying on time.

I know of investors who do sub-2 and carry the loans for 5-10 years. They hang on to them since they are on great terms and its one more loan they have on the books that doesn’t count against them.

I have walked into some local banks, sat down with VP’s, and actually told them that I was thinking about taking one of their borrowers mortgage sub-2. They said that would be great. They get all their back payments, they don’t have to foreclose on their borrower, and now they have a performing note.

There is a huge misconception that if the lender finds out they will hit the due on sale alarm and call the loan due. Rarely will this happen so don’t let this come in the way of deals. Its overhyped and doesn’t hold much weight. Can it happen? Sure it can. The chances? Slim.

Nate-WI