Sub2 & Liens

General Real Estate Investing
1

My questions is this:

I buy a property sub2 the existing loan
I do a check for liens, etc.
I make a contract to purchase it
The seller vacates the property
A new “tenant” moves in on a “lease option”

What happens if a lien gets put on the house from debtors of the former owner?

Who is responsible for the lien?

Thanks

Dave

2

Howdy Dave:

If you buy sub2 will will get the seller to sign a deed and get it recorded. After it is recorded you are the owner and any judgements against the previous owner will not attach to your property.

I have seen it happen where the constable has actually foreclosed on a lien against a house that had already been sold. The new owner had to go to the constable and show proof that he was the owner. The appraisal district showed the old owner of record when the constable was given the order to sell.

I used to do the same type deal on a contract for sale. I would never use this method again as buyer or seller. The lease option method is good to sell property but I do not like to buy using the lease option.

Hope this helps some.

3

Thanks for your prompt reply.

What about in a case where the deed was not recorded because of a “due on sale clause” from the mortgage holder?

Dave

4

I would go ahead and record the deed. I have read several books on the subject and listened to many tapes and talked to several investors and they all agree that the lender is not standing at the courthouse watching to see who is recording what. Most agree that as long as the payments are being made the lenders attitude is who cares. They still have the borrower on the deed of trust and note and that is all that is important.

Thanks for letting me help you.

5

Dave:
TedJr is correct: if you record the deed, future judgements/liens against the former owner do not attach to the property.

If you didn’t record, then the original seller is still considered the deeded owner of the property and liens will be attached. This is what TedJr is alluding to in his lease/option comment: If you BUY on a lease/option, then you don’t have the deed and the seller’s financial difficulties can rebound on you, the property and your buyers. That’s why sub2 gurus recommend getting and RECORDING the deed, rather than just getting a lease/option. SELLING on L/O is OK, if that’s what floats your boat, because you control the deed and therefore the property.

I also agree with TedJr: recording the deed in and of itself most probably will not trigger the DOS. It WILL, however, protect your interest in that property.

Andy

6

Thanks to everyone for your input!

Dave Roekle