Hi All,
I read the following message on our local REI club board, and wondered what the Sub2 experts here think as a solution (or solutions):
[i]My problem:
When you buy a property “Subject to”, hold the property for a few
months or several years, and then resell with the new buyer taking
out a new loan, any money held by the original finance company for
taxes &/or insurance in escrow is refunded to the original sellers,
(i.e. the persons you bought the property from), via a check from the
title company or closing company. This check is made out to the
original owners. The ones who originally took out the loan on the
property you bought “subject to”
In past years one could have stamped “For Deposit Only” on the check
along with the account number and deposited the check in any account.
No problems.
With new banking laws, both Bank of America, and Wells Fargo, have
told me that the check must be endorsed by the Payee.
I have a power of attorney, and a letter of instruction from the
original sellers, stating I have authority to handle all matters
concerning the property. The banks are telling me that they won’t
accept the power of attorney because, they don’t know that a
subsequent Power of attorney may be in effect that cancels the first
one.[/i]
Wow. No comments? Does this not happen to the Sub2 people out there? Or what things do you to avoid such a thing?
That’s just one of the problems with sub 2’s that gurus don’t like to mention. The other is the DOSC. They just tell you to ignore it. When you do a sub 2 in a land trust this can’t happen because these issues are addressed in the paperwork. Just pointing out the facts. Good luck.
Da Wiz
Actually, wiz, MOST sub2 gurus advocate the use of a land trust in the same fashion as you. The very few educators that do not teach to use a land trust have NEVER said to “just ignore” the DOS. You might want to review your “facts” before posting.
And I doubt that the land trust paperwork would handle BoA refusing to accept a check with someone else’s name on it, but maybe you can enlighten us to HOW exactly that it would help, instead of throwing out a useless statement.
NMD,
Do you not know how to get in touch with the sellers at this point? Seems to me to resolve this thing, have them cash the check(s) and give you money if you’re due it.
Raj
The fact is that JCL and other sub 2 gurus (and there are many) teach you to just ignore the DOSC. Very reckless.
Your doubt is wrong. Trust docs spell out exactly how the funds will be distributed at the end and are signed by all parties.
As to useless statements, you just described your post.
Da Wiz
The fact is that JCL and other sub 2 gurus (and there are many) teach you to just ignore the DOSC.
Fact is, they don’t. If you’re going to criticize sub 2 gurus as a whole, I’d think that the least you could do was learn a little about what they do say. Come on, Doc, spend a little money! At least then, you may be able to argue with knowledge and not just spite.
As to the trust docs, now do they REALLY say how to handle a bank that won’t accept a check with someone else’s name on it? If so, let’s here some details. Simply saying that it does doesn’t help anybody on the board. Heck, at this point, it doesn’t help even if they do, as NMD doesn’t have a land trust. I know, why don’t we just stick to the topic, Doc, which was “How do I handle this problem NOW?”
Do you think that you can provide some useful information to actually help, or would your rather continue to run around posting on every thread that you can find, “The NARS PACtrust system would have solved that problem, The NARS PACtrust system would have solved that problem!” Geez, you’re starting to sound like Chicken Little there, Doc.
Sorry for the digression there, NMD. Please continue.
Raj
“So if the DOS becomes an issue then I will re-evalute, but really I am not concerned this will be an issue when all those ARM’s, No Interest and Balloon Note Loans the lenders have been doing start coming do, talk about full plates the lenders will have plenty to worry about other than calling a performing loan.” - John Cash Locke
Here was a mtg banker’s response to JCL: “for your information, DOS does happen and quite frequently. the other dave mentioned Grand Junction. I was in Denver in the 80’s and lost my home during the same time Grand Junction was falling apart. They were looking for ways to avoid enforcing the DOSC but only with the borrower. They offered to let me pay $100 a month (supposed to be $1000) until I could pay more. I told them I had the property rented and they enforced the clause. Even though they already had thousands of properties they had foreclosed on. This was 1989.”
“Lenders DO NOT Want your property. They want you to pay. They also want to move non-performing loans from their books. It ruins their reserve ratios and forces them to up their reserves to cover for it. The best way out is to move it to the write off column. But thats not what we are talking about here.”
“Just because you have never seen or heard of anyone exercising a DOSC does not mean it wont happen or does not happen. If you only believe what you see there is no point in going to a discussion board to learn something new because you wont believe it until you see it.”
As to the topic, the man was asking for solutions. My solution is to handle the subject 2 with a land trust. You never “lose” the seller as he gets hit mtg. paid off and his remaining equity at the END of the transaction and all distribution of funds are spelled out at the SIGNING OF THE TRUST.
Have a nice day.
Da Wiz
Ah! So your solution to his problem of how exactly to get this check cash/deposited is that he SHOULD HAVE put the property into a land trust.
Thank you for wisdom and insight in to the current problem. I’m sure that that helped him greatly. :
Raj