I want to take title to a home(s) using my sub-2 paperwork and then process a short sale. My attny says that in doing this transaction, I am obligating myself to pay on the mortgage as per the terms in the deed of trust.
Who has sub-2’d a home and alleviated themselves of any obligation to actually pay the mortgage?
Also, I am going to need paperwork for California, Arizona, Nevada, and Florida. Can any readers make a recommendation on an attorney in these markets?
Thank you for your help!
Actually you are not legally obligated to make the payments, as the seller is still on the hook. However, the point of doing a subject to is actually paying the mortgage. Besides, why would you spend money on the closing and catching up the seller if you have no intent of making payments.
You should pay the Mortgage, its the moral and ethical thing to do. Why would you purpossly fry the credit of this person. You give Sub2 a bad name. Herbster
Let’s say you take the current loan subject to. In a Short Sale, the property is sold for less than the loan amount. In a short sale, the seller gets nothing.
So, your strategy is to take over the existing loan payments, then sell for less than the loan balance. You have outflow and no income. You spend money and have no profit at the end.
What am I missing? How does this deal put money in your pocket?
I agree you are not legally obligated to the LENDER. However, aren’t you contractually obligated to the SELLER to make his loan payments?
If you fail to make the payments, can’t the seller sue for breach of contract? If you agree the answer is yes, then it sounds like the subto buyer has a LEGAL obligation.
This is the nuttiest thing I’ve read. Think about what you want to do…seriously! Who even suggested this to you?
I was trying to be diplomatic :biggrin
Bronsky,
I think I know what you are trying to do, and have done a few deals over the years where sellers just wanted to walk away and did not care what happened.
In these cases, there were two mortgages on the properties, and getting the seconds to go away, or discount severaly made them deals.
So, we’d just take title into a trust, keeping the seller as beneficiary, with a contract to buy that from them, upon sucessful negotiation to our satisfaction of new terms, discounts, workouts, etc with the underlying financing.
Many times, we’d just buy the seconds for pennies on the dollar, not a whole lot of that happening now…but, you can get a second released pretty easy for less than face value in todays market.
I’ve also taken title, right after a seller has negotiated new terms on their loans (modifications), that then allowed me to take over and make them cashflow.
Changing interest rates, and getting them to remain fixed, either for full term, or a set number of years, (no less than 2-3 years), and sometimes getting lenders to take interest only payments as well, to help keep accounts in good standing, and avoid the lender from having another house to foreclose on.
I have a good idea that you’ll be able to get lenders to bend a little more as the year progesses…they will want to clear as many things as they can before years end, cause the government bail out money won’t handle everything they have in default now…nor will it come right away.
I think your idea is a good one, but the approach is wrong. Tweak it some, because your attorney is right, if you simply take title, and leave a mortgage in default, you’ve really done nothing for the seller…and when lenders approve short sales, they don’t allow title holders at the time of sale make ANY profit…why should they?
Think about it, if you sold a house, carried paper, and then your buyer said, 'here, I sold the house, you get 80% of what I owe you, and I’m making $30k on the sale"…you wouldn’t take or allow that discount would you?
Good luck with it…there are ways to get this done, just be ethical and buy the paper, extinguish it,or make your sale contingent on successful negotiation for a discount on the second, first, new terms, whatever you need to make happen… then take title subject to what’s left, if it makes sense numbers wise.
HTH,
Jim FL