{"id":5802,"date":"2018-09-01T07:30:50","date_gmt":"2018-09-01T11:30:50","guid":{"rendered":"http:\/\/camerondirect.com\/?p=5802"},"modified":"2022-03-10T20:10:59","modified_gmt":"2022-03-10T20:10:59","slug":"subject-to-deals","status":"publish","type":"post","link":"https:\/\/realestatewealthnetwork.com\/blog\/subject-to-deals\/","title":{"rendered":"Stay Out of Hot Water by Avoiding This ONE BIG Mistake With Subject to Deals"},"content":{"rendered":"

Let me start by saying that I am not an attorney and my intention is not to render legal advise in this article. Instead what I\u2019m offering is my experience, and it\u2019s pretty vast. Naturally, you should seek your own legal council relating to your business. Ok, with that said\u2026<\/p>\n

Doing a subject to deal <\/em>refers to taking over the deed of a property subject to the existing mortgage on a house. It can be a confusing area, and sometimes you\u2019ll even be told that it\u2019s impossible or even\u2026illegal!<\/p>\n

Hear me now\u2026 it\u2019s not illegal, but you do need to tread lightly.<\/p>\n

So, in this post, I want to talk about the 1 thing you should absolutely NOT do<\/u> on subject to deals and I\u2019m sharing some other interesting info as well.<\/p>\n

Let\u2019s get to it\u2026<\/p>\n

Behind on Payments or Facing Foreclosure<\/strong><\/p>\n

Be careful if you are taking the deed from someone who is behind<\/em> on their mortgage payments or facing foreclosure. There are a few states that are a little funky about that.<\/p>\n

This is due to the \u201cforeclosure rescue\u201d industry that sprouted up back in 2007 and 2008 during the crash.<\/p>\n

At that time, legislators were saying, \u201cWell this person is giving away a lot of equity. That doesn\u2019t seem right.\u201d But, you know what\u2026 that\u2019s because the buyer probably made up months of unpaid payments. (It seems to me that legislators just clog up every pipe they go near.)<\/p>\n

So be cautious of sellers who are in foreclosure. You\u2019ll want to know all the ins and outs of the laws in your particular state before you proceed.<\/p>\n

The Big NO<\/strong><\/p>\n

In every case\u2026in every state\u2026whatever you do\u2026<\/p>\n

If you take a deed from someone in foreclosure\u2014no matter how much they plead\u2014do NOT lease the property back to them and let them stay.<\/p>\n

When you take the deed from the seller (actually whether they are in foreclosure or not) they have<\/em> to move. They have<\/em> to leave.<\/p>\n

If they refuse to get out, do not<\/em> do that deal<\/strong>. Plain and simple. I can\u2019t be clearer on this matter. Walk away. It\u2019s simply not worth the troubles that could come along with it.<\/p>\n

This should<\/em> seem obvious. Think about it\u2026<\/p>\n

If they\u2019re not paying the lender, why would they pay you?<\/p>\n

Believe me, some sellers will do a brilliant job of trying to convince you why you should let them stay. They\u2019ll say things like, \u201cit\u2019s their home, and they\u2019ll figure all this out and be able to pay you\u201d, and on and on and on\u2026<\/p>\n

But know that most issues with subject to deals are rooted in \u201cleasing back to a defaulted seller.\u201d<\/p>\n

So, that\u2019s the big NO when doing subject to deals. They must leave!<\/p>\n

My Favorite Kinds of Subject To Deals\u2026<\/strong><\/p>\n

My favorite subject to deals are when the seller has already left.<\/p>\n

In fact, they might live in another state. That\u2019s what I look for.<\/p>\n

This does also mean that they could be hard to reach. In this instance, I use a tool called Real Estate Skip Trace to <\/strong>locate hard-to-find sellers; a fast, reliable system that does the hard work for me \u2013 click here to try it out risk-free!<\/a><\/p>\n

Or perhaps it\u2019s a burned-out landlord. That\u2019s one who\u2019s not going to and probably never did live in that house. Just the thought of living in it makes them want to puke, LOL.<\/p>\n

That<\/em> is my kind of subject to deal.<\/p>\n

Perhaps subject to is a strategy you might consider adding to your investing business. Just remember \u2013 the seller must leave in order for you to move forward with the deal.<\/p>\n

What About The Due On Sale Clause?<\/strong><\/p>\n

So, at the very heart of every subject to deal, we receive the deed and take over (not assume!) the underlying loan. In some cases we make up back payments, if it makes sense, and in all cases we start making the payment on the seller\u2019s behalf.\u00a0 This clearly violates the \u201cdue on sale\u201d clause that\u2019s in most every mortgage because a \u201csale\u201d has taken place and the underlying loan was NOT paid off.<\/p>\n

Put another way, this is a violation of a clause written into the \u201ccontract\u201d or agreement between the lender and borrower. This is not a violation of some law! It\u2019s a violation of the terms of the agreement, and..it probably won\u2019t matter.<\/p>\n

The lender will eventually discover that the D.O.S. clause has been violated, probably when they get the new insurance declaration showing you, or better, your entity as title holder and them as additional insured.\u00a0 You need insurance and if the lender is not made aware of the coverage, they\u2019ll bind coverage on your behalf at roughly 3-5 times the normal cost. So don\u2019t let that happen!<\/p>\n

So now that the lender knows, what will they do? Probably nothing because after all, the payment is being made faithfully every month \u2013 by you \u2013 so all is well really. If they do anything, it will probably be to write you a letter saying that the D.O.S. clause has been violated and they want the remaining balance of the loan paid without delay.\u00a0 I simply would ignore it and keep on making the payments because\u2026 and this is important\u2026\u00a0 their only real recourse is to foreclose.<\/p>\n

Yeah. So go through all the legal rigmarole and expenses to foreclose on a loan that is current and in good standing? I don\u2019t think so, at least not in the current lending environment.<\/p>\n

So stay calm and pay on.<\/p>\n

What\u2019s Been Your Experience?<\/strong><\/p>\n

Have you had experience with subject to deals that you\u2019d like to share? Ever heard from a bank on one? I, and other readers, want to know! Please leave your comments below.<\/p>\n

Regards,<\/p>\n

Cameron Dunlap<\/p>","protected":false},"excerpt":{"rendered":"

Let me start by saying that I am not an attorney and my intention is not to render legal advise in this article. Instead what I\u2019m offering is my experience, and it\u2019s pretty vast. Naturally, you should seek your own legal council relating to your business. Ok, with that said\u2026 Doing a subject to deal […]<\/p>\n