New sub 2 deal

I have deal seller is behind 6 months in payments
I want to take the property sub 2 and make back payments.
What steps should should I do? Anything I need to know? Thank you :bobble

Get a LOA signed by the seller so you can talk to the lender regarding payment. Find out what it costs to bring the loan current, if even possible. Sometimes when it’s that far along they refer it to an attorney who handles the foreclosure. If that’s the case you might have to fight through the attorneys beaurocracy to find this information.

First and foremost, what are the numbers?

$7,000 to bring loan current.

Loan amount $130,000
Monthly $990 Piti

Value of property $190,000

Make sure you have the latest info, still get the LOA signed and confirm with the bank.

Then sign it up and start marketing. Use your buyers money to bring current.

Keep this up and that day job will be a thing of he past…


 Luke this is a sub 2 transaction not a short sale, ever hear of a due on sale clause? You do not want to talk to the lender at all, if you want to take this over sub 2? If your going to get a new loan it does not matter.

What kind of condition is this property in? What is your exit strategy? Wholesale / Retail / Rental / Lease Option?


It needs about $10k in repairs. I will sell to a tenant/buyer with Lease option.

Doesn’t matter. You’re not telling them who you are. There are a million reasons why someone would send an LOA to a lender. Insurance companies do it all the time. I would never buy Sub2 without it. Sellers have been known to fabricate things.

That being said, That’s just what I would do. I’m no expert, but I have done several Sub2 deals.


I spoke this morning with my account executives at Marsh and asked them "When and Why does an insurance company have any conversation with my mortgage lender?" 

First a LOA is not required for the insurance company because they do not talk about the property finances, they provide proof of insurance coverage and it is to an entirely different division of the insurance company! The only reason an insurance company would ever know the financial position of the property is if a claim was made, say for a fire and arson / fraud is suspected and the insurance investigator along with local / city / state law enforcement asks the lender for financial information involving balance / payment history / unpaid payments / foreclosure filings?

The insurance company has no desire or interest in the lenders business and covers the property for value or replacement depending on policy!

This was sent by my account executives to me regarding subject 2 transactions:

Difference Between Subject To and a Loan Assumption

In a subject to transaction, neither the seller nor the buyer tells the existing lender that the seller has sold the property and the buyer is now making the payments. The buyer did not obtain the bank’s permission to take over the loan. Lenders put special verbiage into their mortgages and trust deeds that give the lender the right to accelerate the loan in the event of alienation.

Do banks call these loans due and payable upon transfer? It depends. In certain situations, some banks are simply happy that somebody – anybody – is making the payments. But the banks do have the right due to the acceleration clause in the mortgage or trust deed. That’s what makes it a risky situation for a buyer. If the buyer can’t payoff the loan upon the bank’s demand, the bank could initiate foreclosure.

If a buyer does a loan assumption, the buyer formally assumes the loan with the bank’s permission. This means the seller’s name is removed from the loan, and the buyer qualifies for the loan, just like any other purchase money loan. Generally, banks charge the buyer an assumption fee to process a loan assumption, but the fee is much less than the fees to obtain a conventional loan. FHA loans allow for a loan assumption but most conventional loans do not.

Now the title / escrow company will find out the balance owed, payment amount and any terms / conditions of the loan relevant to the sub 2 transaction so that the agreement reflects the factual financial position of the property! Closing papers are drawn up according to the existing underlying loan!