I am wondering if wholesalers are doing subject to contracts more or creating lease options and retailing them. My concern with the subject to is the alienation clause within the Deed of Trust that would accelerate the loan. The buyer would most likely not be able to come up with the needed funds to pay the sellers loan off which would create the property to go into foreclosure damaging the sellers credit. So, why would you not just create a lease option everytime and wholesale the lease option. I understand that with the subject to contract the buyer gets the deed and with the LO the buyer doesn’t, however, there just seems like there is a lot of risk with the alienation clause.
Hi,
If your planning on working as a wholesaler your dealing with retail and investor "Buyers", these people expect to own the property in 15 to 60 days, I would not be doing "Subject to's" or "Lease Options" as neither one is good for an immediate property sale, your better off using a straight contract and either "Assigning" the property or using "Transactional" funding and a double closing!
Subject 2’s are used to set up a deal on a property where you have time to get to it as an investor, where it’s currently rented or leased and you can acquire the property using seller financing to then create your deal at some point down the road and either renovate, or flip it to an end buyer or investor, or where you intend to refinance into it after seasoning in 6 months to one year!
This is especially good to protect your position when your doing a big renovation, but in order to have renovation cash your using the sellers financing in the deal!
A lease option is primarily used to control a property, I like to lease / option properties in a down market and rent / lease them long enough to get into a growing market, then sell them while exercising the option! Some people like to do sandwich lease options where you lease it with an option (A-B) then you lease / option it to an end user (B-C) for a larger down payment and larger amount of rent / lease payment giving time to fix and repair credit and then finance into the house!
When doing a “Subject 2” or a “Lease Option” I recommend using a servicing account through your title or escrow company that can ensure rent / lease payments actually go to paying the PITI on the property and ensures it can not go unpaid! Most lenders today will not call the loan due (Due On Sale Clause) if there recieving there payments on time and they have proof of insurance!
GR