Whose name is on the check to the bank when making sub to payments?

General Real Estate Investing
1

Do you put your name on the check and the original owner’s account number, or do you put their name and account number on the checks?

2

Moorman

Good to meet you

Are you asking how do yo tell the lender what account the check is payment for? If so then I always use an “evidence of payment” sheet that is in triplicate. One for the lender, one for the file, and one is sent to the borrower.

If however you’re asking; Do you disguise to the lender who is making the payment? The answer is NO. Your name on the check (name of the current owner).

There are four methods I use to notice the lender that a new owner is now in place and I have yet to have DOC issue.

  1. Escrow requests a payoff demand as if the property were being transferred. The reason for a payoff for a purchase is that prepayment penalties can be affected differently on a refinance over a purchase/sell.

  2. They receive my payments with my name on the check

  3. Insurance has my name on the policy

  4. I have recorded constructive notice by recording a grant deed.

Good luck

Michael

3

Explain in laymans terms why u do a payoff request.
The grant deed, is that a quit claim deed from the original owner to u that u record and send the lender a copy of?

4

A grant deed is not a quick claim deed although they both transfer ownership. AND no I never send it to the lender. I record it which creates constructive notice.

As for why request a payoff. That is because on loans there are payoff fees that are not included in the principle balance. And if a loan has a prepayment penalty then you need to know if its a hard or soft prepayment penalty… The way to find that out is by asking for a beneficiary statement(payoff) from the lender.

Good luck

Michael

5

Ok, so this payoff statement is used for when you get it refinanced, correct?

6

Not in all situations… If a borrower has a Hard prepay then they are required to pay a penalty if they sell or refi within the prepay period. However if they have a soft prepay then they only pay if they refi. Thus the payoff on a sell would be different.

With that said if its a hard prepay then you will want to make certain you adjust your numbers to include the prepay cost however if you resale without paying off the note and extend past the prepay period you have made more money.

Good luck

Michael

7

Great response Michael. Prepayment penalties are something I think a lot of Sub2 guys forget about. Its an important piece of information.

8

I my state of SC, we have a warranty deed. California has a grant deed and does not use a warranty deed. Both states also have a quit claim deed which is a different form of deed.

9

I’ve done dozens of ‘subject to’ deals over the years and here are some additional options for payments you might want to consider that have worked well for me:

  1. Put house in trust, have a trust checking account, you are trustee, and write a check from the trust account.

  2. Set up a payment online and have the seller provide you with the user name and password.

  3. Send payments in with cashier’s checks with the account number and property address on the memo line.

All of these have been used successfully in my business.

Hope this helps.

Rob

R.E. Investor/Mentor

10

What kind of trust do u use and what bank in Georgia allows u to set up a trust account?I thought it was hard to get a trust account.