Subject 2

If I were to buy a seller’s home subject to their existing financing, and if the lender found out the home changed hands and executed their due on sale clause after the sale was finalized, what would be my options?

Would I have to come up with the money to pay off their loan by getting new financing? What if I couldn’t obtain new financing?

What is the likelihood of the lender exercising their clause? And would I be making the payments in the seller’s name indefinitely if I did take them over?

The chances of the lender calling it due is very small…just keep the payments on-time and you won’t have that problem.


  • If they call it, give them a call, they may have you pay a small fee and let you assume the loan. (they will want loan fees and such).

  • Refi it.

  • I’m sure there are others, but again keep it on-time and its a worry to worry about when it happens. You Already know it exists, and your getting some quick answers. Just don’t let it stop you or even slow you down.

Will you be making payments indefinitely?..depends on your exit strategy. But the longest would be the term of the loan, then its paid off. But you could sell it and demand a payoff within 5yrs. Hell mark up the interest a point or two, and make a little more in the mean time.

Good Luck.

YOU can assume or refi.
A PARTNER can assume or refi.
Your BUYER can assume or refi.

Or you could just call the lenders bluff.

or you can just place the property in a land trust, then do your subject 2 and not worry about the DOSC. The seller remains on the loan and is a 10% owner of the trust. You’re protected under Federal law.


Should you feel comfortable using a Land Trust they are available on the net for about $12 bucks, I would just make sure it is state specific.

John $Cash$ Locke

John admittedly knows nothing about land trusts. He doesn’t use them … never has. I suggest you go through the topics and you will learn the differences. All land trusts are not the same. You get what you pay for and always use a non-profit corporation as your trustee for maximum protection.

Gary is absolutey correct I do not know a darn thing about Land Trusts except enough to know you don’t need one.

Here is what I do know, how do Subject To deals and lots of them without a DOSC being called or problems with Attorney Generals, etc., now Gary will challange you to play golf or get in a boxing ring, which he as done to posters.

So here is my challange Gary one on one the number of proven Subject To deals I have done against the number you have done using your method. We are not talking about golf, boxing etc., this is a discussion board for creative real estate investing.

When I was speaking at seminars part of my presentation was if you are going to listen to someone make sure they have really done deals and I showed my deals off County Recorders webs sites on the big screen deal after deal in my Corporate entity. Even ole Bill has seen them.

So speak up Gary how many deals can you prove you have done when giving guideance to the posters here?

John $Cash$ Locke

In response to Mr. Locke, I will simply post an email I received just today:

Mr. Mialocq,

About a month ago I commented how I thought you were selling something on You replied back and I realized I was in the wrong. I sent you an apology.

At the time, I was ignorant about the NARS Trust. WOW. What an eye opener. I actually found this NARS site by accident. I was researching trusts, and stumbled onto this site. I’m already sold. No more Sub2’s here in Vegas for me. 2 months ago, Sub2 was all I’d do, I thought it was the greatest thing in the world. No more.

I’m now learning all I can about the NARS Trust. I love the fact that I can offer sellers a much higher asking price. Do you know how many opportunities over the last two years I have passed on that were perfect for the NARS Trust? It makes me sick.

Anyways, as soon as I saw your post I remembered you. I doubt you remember my post - it was in a thread where you and John Locke were debating. Either way, if you do remember, I apologize for criticizing you about trying to “sell” the NARS Trust. You were right all along - it is a better way to buy houses - much better than Sub2.

S in Las Vegas


John knows that I owned a vocational rehab business for 24 years and just dabbled in real estate. I have been using the NARS trust since I first discovered it in 2003. Bill Gatten who developed it in 1984 has used it in thousands of transactions. Besides, I can’t be nearly as old as John.



I did not expect you to accept my challange and we all know why. The greatest majority of my deals were done in a 5 year period and I still am doing them.

Glad you brought up Las Vegas, did several hundred deals there myself. Have a student there who is so busy he has about 35 deals he cannot get to, maybe S would like some of them?

Funny thing about transactions, I remember a course writer I meet who told me he done 300 deals, then after we met I saw where he changed it to 600 transactions, guess if you look at the buy as a transaction and the sell as a transaction then you could double the amount you claim to have done.

I assure you my students have done thousands of tranactions…I mean real deals…

It is the difference between talking the talk and walking the walk. So when I say you can pick up a land trust for $12 bucks on the internet, you really should think about what you comment or be prepared to stand to post about what you have done in our great industry.

John $Cash$ Locke

It’s not about how many deals you have done, John – it’s about the best way to do them. Bill’s way is simply the best. You seem very threatened by the land trust method.


You have a PhD so you can consul people, same thing applies to creative investing you either have done deals or you just cut and paste what someone else says.

Why should I be threatened, you are the one who keeps bringing up the same thing in every post, Federal Protection, No DOSC, etc., telling the members here about this non revelant information, if it were, I would not have been able to do deals without these problems. When a person has to keep repeating the same thing usually they are the one who is threatended and must continually post the same info to convince themselves what they are saying is true.

Questions you keep ducking…is there a problem answering…?

How much of a Surety Bond does your Trustee have to protect all the deals he is the Trustee of, I know you said a he handles a Billion Dollars worth of trusts so this bond must be a whopper?

You said your Trustee was in Law Enforcement and FBI academy trained. Was he a cop who like other cops received training at the academy or an FBI agent?

Stand To Post how many deals have you personally done that you can honestly and with expierence guide posters?

I told you when you commented on my posts be prepared to stand to post and it certainly is about how many deals a person has done when offering guideance to posters, who really want honest answers.

John $Cash$ Locke

I have done creative real estate deals since 1978, mostly using subject 2’s and lease options. In 2003, I discovered a much better way, the NARS land trust. Just read the letter above that I received today.

As to repetition, John, give me a break. You post everytime a land trust is mentioned and Dave Hurlbrink embarrassed you to the point that you deleted the entire post. Real estate IS a great industry, John, and it’s certainly not YOURS.

I have never been professionally involved in real estate. I have dabbled in it. I did, however, work as a law clerk for a Sacramento attorney for three years who specialized in defending people who were victimized by lender or realtor fraud, and I am very experienced in the real estate contracts area. I helped hundreds of people who were victimized by the Golden Plan scandal of the 1980’s.

The NARS Trust is federally protected and does not trigger the DOSC. You can’t say that about your method, John, and you pop off regularly about land trusts even though you have admitted in your own posts that you know nothing about them. It doesn’t take a psychologist to figure out why, now does it John?

I don’t have to defend a method that has been used successfully for 22 years and certainly not to someone who knows nothing and cares nothing about them. Next topic.

Gary…MY OPINION ONLY…I think you are deliberately bringing up loan fraud and the DOS issues to scare people into using a NARS trust. I don’t have a problem with anyone who wants to use it, but the scare tactics are unprofessional. You seem to be…again, my opinion…SEEM to be trying to drum up business via the above methods. Many question you answer have nothing to do with NARS trusts, yet you answer with NARS answers. If people ask direct trust questions, thats one thing. But this is out of hand. I think these posts mislead people into thinking the DOS is a major issue. Due dilligence takes care of the DOS, you don’t need a trust to avoid something that is basically a non issue.

You also seem to talk a lot about loan fraud and in some of your posts, you imply that a regular sub 2 investment takes advantage of sellers equity position. There is NO NEED to mention this, unless you have a direct reason to. I am tired of seeing that. You always talk about how you leave the seller 10% interest in the trust…well, I want 100% of ALL OF MY DEALS. I am not leaving the seller any percent of ownership. If a deal warrants the seller be given some equity, I will gladly discuss it with them. But some of your posts seem to suggest the traditional sub 2 deals leave the seller out in the cold, and again, that is misleading. There is ZERO in common between a traditional sub 2 deal and equity skimming/stripping. Another non issue that you use to try to convince people how sub 2 deals are wrong and bad for sellers

I use the analogy of protection as follows:

I protect my residence with a deadbolt lock on all of my doors, and regular window locks. I am protected just fine. I don’t need 20 foot tall fences with barbed wire, a moat with fire breathing dragons, and armed guards to protect me, for the slim chance I have a problem.

With regards to the trustee, my personal issue is paying 1% of the value of the house to a non profit corporation. This I compare to having a moat and fire breathing dragons protecting my house. It is overkill, especially with the cost to set it up, on top of the monthly fees and 1%. The advantages of using the NARS trust are not nearly worth the cost. I don’t think we need to see this same thing over and over. And who cares if your trustee worked for the FBI…another thing that has no bearing on a real estate transaction. The cost in your link on your profile is much more than most investors want to pay. The low equity deals done in my area would be useless if I had to pay out that kind of money. The benefits, if any, are not worth the cost, not even close. I would prefer to keep the money.

The DOS is so rarely invoked that there is little need to bring up the protection the NARS seemingly, or possibly provides. You make it sound like the DOS is a major issue, when if fact it is really a non issue. I have yet to see anyone post that one was called and followed through on. So please quit saying that over and over.

Some of your posts explaining the NARS trust are very good, and if people want to specifically know about them, that is ok in my opinion. But the way your posts come across makes it seem like you are doing nothing more than trying to hustle up some business…either for yourself or your mentor. Again, that is MY OPINION, that is the way your posts come across to me. Any your past experience is relevant. nobody cares about your mentors 22 years of experience since he is not the one posting this, so why keep mentioning it.

I personally thing these forums have took a major downturn lately, and this is one of the things I am tired of seeing. A person should not have a problem posting their specific deals if they give advice.

I respect your knowledge of the NARS trust, but I disagree with the way it comes across…you “appear” to be trying to hustle some business. And I know many others share my views, but because of posting rules, or their own personality, they may not want to tread here. Me, I am very opinionated, and I don’t beat around the bush. I also have a high regard for the moderators and I know if the post is out of line, it will be edited or removed. I have had posts removed or altered before, and I don’t have a problem with it.

Regards, Tony.


Tribe specifically asked about the DOSC and was concerned. I made no mention of loan fraud and do not unless it is pertinent to the subject. I think you view my posts with preconceived notions.

=== You don’t pay 1% of the value of the house to a non-profit corporation. You pay only $40 per month (which is included in your tenant’s lease payment) for the non-profit’s collection and payment services. So, apparently you don’t understand the trust, either.

=== You can read the letter above from S in Vegas to see that I don’t sell land trusts.

As for allowing the Seller to retain a 10% beneficiary interest, Tony, that is done to be in compliance with the parameters of Garn-St.Germain, the Federal law passed by Congress, which makes the trust legal and immune to the DOSC.

Be as opinionated as you like, after all, this is America.

Da Wiz

Obviously both Gary and John are selling their particular way of buying property, it doesn’t take a genius to figure that out and realize that because of that both of their opinions are going to be a little (maybe more than a little) tainted. I hope readers are intelligent enough to figure out that neither way is necessarily better.

Gary, stop already. You claim to not be selling trusts but your signature includes a website that’s selling trusts!


You are obviously new. My website does not sell trusts. I simply provide all the information that anyone needs when using a trust in a transaction with me. I use the trust as an investor to acquire and manage properties. Clearly there is a lot to learn so I always send people to that site to get as much information as they can. You won’t find one person to whom I have “sold a trust”. Go up to the post at 7:18 and read it. If anyone is selling anything, I think it is here:


Da Wiz


Stand To Post! Just 3 Questions?

John $Cash$ Locke

Quote from Gary’s post: “If anyone is selling anything, I think it is here:

Gary, so let me get this straight… when you buy someone’s house, you charge them to set up and manage the trust?

No. I pay to set up the trust for the seller, then get that money back out of the tenant buyer’s initial payment, which covers closing costs (trust, advertising, escrow, etc.), plus 3 monthly lease payments… The monthly servicing fee of $40 charged by the non-profit corporation is included in the tenant’s monthly payment. The Trustee collects the lease payment, pays the mortgage, and sends me a check for my cash flow each month. It’s worth $40 to me, especially since my tenant pays for this service.