Subject to

General Real Estate Investing
1

I have a few concerns about doing a subject to.

  1. Can the former homeowner(person who deed me the property) sue me if I default on the loan?
  2. If the lender sends all information about the mortgage to me wouldn’t that throw a red flag?
  3. And if I send payment they would see that the name on the check different from the originator of the loan, would that throw a red flag?
  4. Also, how the former homeowner trust you to make those house payments, would there be a document for that or something?

Just a little concern about a few things.
Any replies would be most helpful

Thank you

2

  1. YES, you can be sued for anything.

  2. NO, Operate as a management company.

  3. NO, all they care is just the money.

  4. YES, Contract for sale. You keep your promises. If you can’t make the payments bring in another investor to help you even if you lose money.

  5. Can the former homeowner(person who deed me the property) sue me if I default on the loan?

  6. If the lender sends all information about the mortgage to me wouldn’t that throw a red flag?

  7. And if I send payment they would see that the name on the check different from the originator of the loan, would that throw a red flag?

  8. Also, how the former homeowner trust you to make those house payments, would there be a document for that or something?

3

Why would you buy a house you cannot make payments on?

4

Well, what i mean is if the mortgage company calls the note due and if i cant pay the loan off, the former homeowner might get upset. can he sue me? or would he even have case? which in my opinon i don’t think he would, but i am just saying.

Thank you,

5

Well, in this country anyone can sue anyone. I usually have them sign a disclosure and one of the paragraphs explains the due on sale, and explains it might get called. Would it protect me? only the judge can say if i ever get sued.

6

First make sure that you have a disclosure form that the seller will sign indemnifying you from everything on the face of the planet. Mine states that I may ore may not make the payments and on and on.

Next you really do not have to worry about the bank calling the note unless the interest rates climb like crazy. That is how the due on sale clause came about during the mid 80’s. Banks had old notes at 6 - 8% and they were being assigned and wrap around mortgages were being done. Interest rates on loans were climbing over 15 - 18% or higher and the banks felt they were being “cheated.”

A really good solution I have found is to use land trusts. These also can be structured in such a way to avoid the chain of title issues that can arise in a sale.

Lastly the best way to explain to the home owner why you will make the payments is that you have money invested in the deal and you do not make anything until the property is sold. That is why you will make the payments. If they are truly motivated this won’t even come up.