sub2 - owner can be responsible for money you've paid to catch up back payments

General Real Estate Investing
1

hey guys,

i visited a home in preforeclosure. they already had investors come and speak with them. one of the options offered to them was a sub2. (there’s two parts too this post so bare with me).

1:
the homeowners were told by a particular investor that if the house did not sell within a year or so that they could be liable for the money they shelled out to catch up the back payments. i have never heard of this. is this common practice? if it is, (not that i’d like to use it) however how would someting like that go into contract?

2:
the homeowners were concerned the the loan would stay in their name and didn’t like that liability. how would you convince them that they shouldn’t worry?

thanks guys,
ryan

2

when people like you they’ll talk to you; when they trust you they will do business with you

i have never heard of the first point you wrote about. i’d be careful if it’s in the contract. IMO, if an investor is there to help the homeowner out of a bind, why potentialy make it worse? any ethical and professional investor would not do this, and would have the house sold in 30 days-3 mos, depending on the market. if it’s sold properly, that is, marketed to the right prospective buyers then they should not worry. i say they probably lost money b4 and are safegaurding themselves. do it right or don’t do it at all

3

thanks tony,

i agree…i was very surprised to hear that. i even offerd to help them stay in their home for free (talk to the bank on their behalf) if they wanted to stay there.

i mentioned that if i put in $20k of my own money that , that would be the risk i was taking and 1. wouldn’t try to request it back. 2. would not engage in somethign where it would take a year plus to sell.

4

i was brainstorming with this situation again and thought maybe i could work someting out that the homeowners might find more pleasing.

what if i a L/O with this one? offered the home owners a $20k down payment, lease for their mortgage payment. with an option to buy after 5 years for $xxxxx. Then of offer the home for $20k (maybe a little more?) down payment. Slightly higher monthly rent with an option to buy for $xxxx in 2 or 3 years?

i guess i’m looking at a sandwich lease…anyone have any feedback?

ryan

5

Ryan,
You seem like a honest fair investor and that is good but doing a foreclosure bailout as you outlined is tricky business and you need to really have a good idea that the seller can turn it around so keeping the seller in the home to me is not a very good idea…

As to the investors you outlined they seems unethical once you take that reponsibility on it is your babie.
If the homeowner stays on the loan and you have your exit strategy planned in showing the seller how you are protecting the home and his/her credit you should be good to go… those other investors apparantly could not care less…and that puts us investors like us in a bad light unfortunately.
I would not put down 20k but what I would do it setup the account with a good loan servicing company and put in 6 months payments or whatever you negotiate I do not know the financials so I can not advise but to put up a couple grand to get them on their way if the deal calls for it so be it!!!
As to the contract to have the sellers liable for back payments if the house did not sell first off if you took the home i can see if the house could not sell but once you acquire that deed you legally own it and are liable for payments as to what you negotiate just give yourself a out but do not put the sellers in any more dire straits than they are currently in.
I have a way to protect all parties in any given transaction if you are interested let me know you can email me if you like…

Good luck and thanks for being ethical and legal in your business.

6

if you say you have a good way to protect all parties in any given transaction, why not post them here instead of the “contact me” thing?

7

Bobo,
For one reason,I do not wish to come across soliticing on the board and it is somewhat involved since I notice if you do even slightly you post can get deleted and you get warning or reprimands…
I answer questions to the specific situation but the board is not the place to get into it
I conduct my business in a professional manner…
You have my email if you wish to attain more information…
I noticed also most people do waste your time and I’d rather obviously work with serious people.

Anybody can email me to follow-up so if there are interested they can do so…

8

THIS is more along the lines of soliciting than answering questions or providing information in the boards.

9

colvegas,

thanks for your reply. just to clarify,i wasn’t thinking about the letting the HO’s stay in the house. I was thinking about having them move out and rent it out to differnet people (a sandwhich lease).

I sent you a PM.

Ryan