Even if you set up a land trust, if you do a sub2 exist. financing deal, if the seller declares bankruptcy say, 2 years down the road, does the bank go after his house? if the buyer is making payments, and the sudden the house is taken away, is he out of luck?
And if the buyer eventually has financial struggles and stops making payments, if the seller already has another house pymnt by then or just isn’t budgeted for taking back the pymnts, then what’s the seller to do?
The reason I ask, is cause I’m afraid in either case, i’m gonna get phone calls with an unhappy seller or buyer who may also try to sue.
That’s right. There is some risk involved in most real estate transactions, and the more people involved, the more risk there is.
It’s getting more and more common for people to not perform, and they don’t seem to care whether they have a contract or not. So the more people in any given deal where it is critical that they perform as they agreed, the bigger the odds are that your deal will fall apart at some point.
I saw this post a few days ago, figured someone would have stepped up to answer…sorry.
Want to know reality, what happens in the situation you describe?
Simple…you BUY subject to, make the payments, and two years later the seller you bought from files BK…either including, or not including the loan on the house in their BK…Nothing happens.
As long as you continue to make the payments, you’ll be fine.
Sure, there are those who will respond here and say, “BUT, this and this and that CAN happen, and you can, et etc.”
However, EVERY single time someone says, “Uh oh, the seller filed BK, watch out for this and this”…all I have to do is ask, “how many houses have you bought subject to where the sellers later filed BK?”
and the answer is usually (99.9%, cause nothing in life is a true 100%, although I’ve never seem the .01%.anyway…
the answer to the above is always…NONE!
So, here’s reality, from someone who currently owns over 30 houses where this occurred, and has owned a few dozen others like this…
Nothing happens, and frankly, I don’t mind this happening and kind of enjoy it.
Think about this…
You buy subject to from seller Joe.
Two years later, you’ve made payments on time, etc, kept the house in good shape, have equity and cashflow in the property, etc.
The seller, decides they have other financial issues after selling the house to you, and files BK, including their personal credit liability with regard to the loan on YOUR HOUSE, and get discharged (relieved of this debt obligation)…
what do you have?
A house, with a loan on it, which is secured by the house…but, if the lender who holds that loan decided to foreclose, or it goes into default, the house gets taken, and not one single person will have their credit report dinged as a result…cause no one personally signed for the note/mortgage, other than the orignal barrower, who filed BK and was discharged from that debt obligation.
Now, you own a house, with no personal recourse, aside from the security of the property itself for the loan against it.
A great place to be…
So, when a seller tells me, well after buying their house subject to, “Jim, I’m gonna file BK and include the mortgage on your house in it”…