before i learned sub2, i bought a property sub2 2 mos. ago from an investor who bought the house from someone foreclosing. now i received cancellation of insurance notice from the mortg. co and since were not the owner we dont know what and why it was cancelled. we called the insurance but cant get an answer. so i bought another insurance in my name and the former owners name. is this correct? what happen if i have a claim. the investor only gave us an agreement for deed and we record it in the county. was i supposed to get something else for insurance? im just now learning about sub2 and it seems that i need something else to complete the transaction. what can i do at this point, can someone help, thanks a lot.
latundan,
If you have an Agreement for Deed, then that is the way you bought it, not Sub2.
Do you have: :deal
a POA (Power of Attorney)?
an authorization release form from the seller?
a letter from the seller terminating the existing policy?
a signed deed in escrow?
etc., etc.
It’s commendable to get out and take action, but it’s also wise to do so armed with appropriate knowledge. Sorry for beating up on you a bit, but I see this all the time, and it irritates me some.
Folks (not necessarily you) buy off on this “it’s easy” crap and rush out and make mistakes. It ain’t easy, it’s a business. And even if you study your behind off, you will still make mistakes. I do it frequently, but typically the mistakes are smaller and smaller.
I’m not sure what…
so i bought another insurance in my name and the former owners name.
actually means (details missing), but you don’t actually own the property yet. I won’t go into equitable vs. legal title at this point, but the seller still retains legal title to the property.
Are you still in contact with the seller? I hope so in order to someday get the title.
My suggestion would be to sit down with your insurance agent (experienced hopefully), explain all the details and get yourself appropriate coverage. A quality agent with access to multiple companies can resolve this issue.
Once that’s done I’d find an experienced investor or attorney to help with the rest. In my opinion you might as well address any remaining issues you have with the deal now.
I apologize for the harshness of my tone and the soapbox. The insurance issue isn’t a big deal and you can get it worked out. I’d strongly suggest getting more educated before doing the next one like this.
Take care…
tim, no i dont have all the documents you mentioned besides the assignment for deed. you’re right, sometimes, i really want to kick myself for buying this property without all the knowledge i needed. i got too excited with the deal, the investor i bought it from explained to me that once the assignment for deed is recorded in the county that i have complete control of the property and can refi it in my name. since we found a buyer by lease option, i thought, i would just hold it for a year. now with this insurance problem all of a sudden showed up, i realized i can be in trouble. yes im still in contact with the seller (the investor) but not the seller who he bought it from (whos name is on the mortgage). tim, if this is not subject to transaction, then what kind of transaction did we do? he gave me an agreement for deed and have it notarized and recorded in the county.
i do not know how the insurance of the original owner got cancelled, but the mortgage company sent us a notice. so i contacted an insurance broker and explained to him what happened and bought the insurance under the original owners name (since he’s in the mortgage paper) and my name so that the mortgage company will not suspect that this house has been sold. i also talked to a lawyer who understand about this transactions. he said he can do the closing for me if and when my buyer excercise the option. my thinking is that if my buyer will not excercise his option to buy, then i will just go ahead and refinance it. im just really feeling leery about the insurance part if something happen to the house, will i be able to claim or the orig. owner.
do you think i needed those documents you mentioned now and try to get a hold of the original owner? am i in a lot of trouble now, should i refi it now as the best option?
without buying this property accidentally, i wont be learning about subject to deals or its existence, ive been buying property the conventional way, and in a way its a blessing in disguissed because im now really interested in buying this way. i just think i was too brave and stupid to just do it. now, im going to buy a course and learn everything before doing my next deal. thank you tim, for taking your time to respond to my email. i really appreciate your time.
Latundan,
Again, I’d suggest getting your attorney (or an experienced investor) to help more. It sounds like you bought the property under Agreement for Deed, known as a Contract for Deed here in TX and other names in other states. If that’s the case, you don’t really have title.
A deed is what evidences ownership, and there are several variations to that document as well.
If your insurance agent tells you that your insurance is good, I guess it is. My concern, after having had discussions with higher-up underwriters at two fairly large companies is that if there was a full loss claim (house burns down), the insurance company make take the position that the policy is invalid. I was told that the prior owner has no insurable interest regardless of the fact that their name is on the loan.
Also, since you don’t have a Power of Attorney from the original seller, how would you cash a claim check, if it was large? Smaller checks can typically just be deposited into your account without any hassle, but I’m not sure that’s true for larger checks (say, above $10,000).
So, my suggestions are:
If you have a deed, record it.
Get more help.
Doublecheck your insurance policy.
Be ready to refi if you need.
Get more education before the next one.
John Locke has a Sub2 course available on this site. William Tingle will soon be offering one here as well. Bill Bronchick has one available at legalwiz.com. Charlie and Randy France have one at getthedeed.com as well.
Hope it helps.