Shady Sub2 Investor

I got a call from a seller whose home was purchased sub2 earlier this year by an investor I did some bird dogging for (and share a website with) complaining that after taking over the home he has failed to make a single mortgage payment on the property. I had no part in this deal but feel the urge to try to help the seller out. What are the seller’s options after entering into a sub2 agreement with an investor?

There isn’t enough detail to give an informed response. So take what I offer as a gross guess in what to do.

Meantime, what does the contract verbiage with the original owners say?

Does the investor have a POA over the property?

Are the payments (supposed to be) being made directly to the bank, or to a third party?

Is there a default clause in the agreement?

Not knowing anything more than what you’ve outlined, I would send the investor a certified demand letter for all the payments due, plus reinstatement fees, and attorney costs, if any, and a return of the title, forthwith.

If the investor did comply, there’s still an issue with the original seller’s credit rating being temporarily damaged, or made worse.

As an aside, could the problem be that the investor sold the property and the tenant/buyer is not making payments?

Likely the original seller and the investor will have let this go too far to cure and make sense financially for anyone. The next step could be to bring suit for damages to the original seller’s credit. This becomes an enormously difficult thing to assess, unless there are some statutes in your state that cover this.

This may not be a ‘shady’ investor as much as an incompetent investor. There is a difference, even if the effect is the same. Just saying.

BTW, the original seller should NOT have allowed the payments to go into arrears. He should have demanded the payments be brought current, and/or a return of the title.

In TX, the investor may have broken the law in the first place regarding a Sub2 transaction. It’s probably time to explain to the investor the laws that were broken, and that he’s got 15 days to cure the default and return the deed, or be prosecuted for fraud and potentially begin his new investing career from a Texas state prison. I don’t know.

Hope that helps. We need more information on the transaction structure.