Posted by johnman on December 18, 1998 at 14:33:11:
Brad,
Thanks for the explanation. Time to print.
Johnman
A SELLERS’ QUESTION/CONCERN!! - Posted by Johnman
Posted by Johnman on December 17, 1998 at 20:21:49:
Hi everybody,
When I was talking to the owner of this property that is about to go into foreclosure, he asked me a question that was a legit question and I would like to know how you veterans out there would have answered. I would like to see how I did. Just as a unit of measure. Bear in mind I was trying to go the land trust route on this deal. Note is qualifying assumption. I am making the back payments.
Here is the question:
“You are wanting me to transfer the title to you but leaving the note in my name. How do I know that you will be making the payments and not leave me hanging? I called you to see if you could help me in my situation. I just want to know.”
The seller told me that they know of someone that was in this same position as they are in now and the “investor/purchasor” left the sellers’ in worst shape than before.
I have my own question, when I do sell the property, will the sellers’ (whom I bought prop from) be notified of the transaction or will the note just be paid off at closing? Simple money shuffling.
Hope to hear from you folks,
Johnman
Re: A SELLERS’ QUESTION/CONCERN!! - Posted by Brad Crouch
Posted by Brad Crouch on December 17, 1998 at 21:07:36:
Johnman,
There maybe more than one answer, but here is the one I know about: "Mr. Seller, we are going to use an escrow account. The monthly payments will be made to this account. The company collecting these monies will be under contract to make your mortgage payments, faithfully. In the meantime I will sign a quit claim deed for them to hold, and to send to you if a default occurs. You can record this quit claim deed and keep all the monies you have received, and the property reverts back to you. That’s YOUR protection.
"My protection is that you will also sign something, a warranty deed. And the escrow company will hold it till the agreed upon amount has been paid. Then they will give it to me.
“I will also need to insure this property against unforseen incidents so I’ll need to record a performance mortgage so that I’ll have an interest in the property and thus will have the “standing” to insure the property”.
When you sell the property, you can simply assign your interests in the deal, to someone else (who pays you the amount of your profit). If you don’t want to assign your interests, you could also have a “double closing”, which will add to the closing costs and force you to take title for a minute or so.
Good Luck,
Brad
Re: A SELLERS’ QUESTION/CONCERN!! - Posted by Doug
Posted by Doug on December 17, 1998 at 20:47:57:
Are you going to be qualifying the mortgage to assume the note in your name or are you talking about paying the back payments and leaving the Mortgage in the sellers name?
I dont think you will be able to transfer the title to your name without satisfying the mortgage first as the due on sale clause will come into effect. When I say satisfying the Mortgage I dont mean just the back payments I mean the whole loan…
You can transfer the title to your name by just paying the back payments as long as you qualify and assume the loan in your name… Is the assumable Mortgage an FHA originated prior to 1989? If it is you can assume with no qualifying… If it is a conventional assumable it should have an origination date of prior to 1987 to be a non qualifying assumable…
If it has an origination date after 1989 then it would be a full qualifying loan…
Hope this helps you out…
Doug
notes4sale@yahoo.com
Re: A SELLERS’ QUESTION/CONCERN!! - Posted by johnman
Posted by johnman on December 17, 1998 at 21:44:24:
Never thought of that! That brings up a question: do I have to pay to set-up an escrow account?
Another question: Performance Mortgage? Where can I read up on this? Is it too lengthy for you to elaborate?
Double closing : Is this just like a simultaneous closing where I have a buyer for the property and at closing I am buyer and seller at the same time?
Johnman
Re: A SELLERS’ QUESTION/CONCERN!! - Posted by John Katitus
Posted by John Katitus on December 18, 1998 at 01:55:47:
Unless the mortgage is VA or FHA non-qualifying assumable, there is really no reason to consider assuming it- just buy “subject to.” Using the Land Trust gets around the due-on-sale clause by itself.
Here’s the way I do the Land Trust part: After the property is deeded into the Land Trust, there will be a Trustee that you name. You can write a letter to the bank from your seller notifying them that “for estate planning reasons” the property has been put into a Land Trust and that in the future all mortgage matters are to be handled by and addressed to the Trustee at his address. You don’t need to quote Garn-St Germaine unless they question it. Make sure the seller signs this paper and mail it to the bank’s change of address address. This way, your Trustee can get the payment book and make the payment with his personal check.
Get another of the same document signed and have the Trustee contact the insurance company and ask them to change the insured’s name to: The 222 Second Street Land Trust, Whoever’s Name, Trustee.
I agree with S - ask the seller why you would make up back payments if you were not going to keep the mortgage current. He already didn’t make the payments himself! If you don’t bail him out he’s going to foreclosure! And he has the nerve to wonder if YOU will make the payments!? He can simply call the bank’s automated info line if he is so worried about it.
Re: A SELLERS’ QUESTION/CONCERN!! - Posted by Joey P
Posted by Joey P on December 18, 1998 at 01:18:37:
You guys…just wondering, but, if the mortgage is assumable (as I thought johnman said in the original message,) then there is no due on sale to activate.
Thanks,
Joey P.
Re: A SELLERS’ QUESTION/CONCERN!! - Posted by johnman
Posted by johnman on December 17, 1998 at 21:37:45:
Doug,
The way this scenario is going to be played as I see it is as long as I place the property in a land trust and following the guidelines laid out in Mr. Bronchicks’ course “Get that property out of your name” it will not trigger the due on sale clause. You are correct that I can’t transfer it in MY NAME. It will be under a land trust. I just didn’t explain all that to the seller at this time. He is very motivated.
Thanks for the input.
Johnman
Re: A SELLERS’ QUESTION/CONCERN!! - Posted by SCook85
Posted by SCook85 on December 17, 1998 at 21:05:43:
Johnman,
First of all, the seller is probably telling you a story about a friend that never existed. If he really had a friend that was burned in this situation then he probably would not be talking to you. This is a common objection of many people. They relate it to a story that they make up, it’s easier then them questioning your credibility.
I’ve never actually done one of these before, but I would recommend putting your name on the line. Tell them that if you don’t pay they will tell every one and you can’t afford to have that happen. If you are catching up there payments for them, let them know that the money you are putting up is an investment and you have no intention of throwing it away. Also tell them that if you catch there payments up and then decide to stop paying they are in no worse shape then they are in now. My favorite phrase is to tell people that I am in this to make money, if I don’t perform i don’t make money. That seems to get there attention.
SCook85
Re: A SELLERS’ QUESTION/CONCERN!! - Posted by Brad Crouch
Posted by Brad Crouch on December 18, 1998 at 14:21:37:
Johnman,
Yes, there is a setup fee and a monthly fee. Sometimes more charges than that. Like $3 for each check they write on behalf of this account, $100 for a set of documents to hold, pending some event. Maybe you can get the seller to pay half the costs and your tenant buyer to pay the other half. A loan servicing company or escrow company who does this has a rate sheet listing all incidental charges.
A Performance Mortgage is just a second or third mortgage, except there are no payments to be made on it. It just secures your position and gives you a lien on the property so it can’t be sold out from under you without your knowledge.
A double closing is only another way of saying simultaneous closing.
Brad
Re: A SELLERS’ QUESTION/CONCERN!! - Posted by Johnman
Posted by Johnman on December 18, 1998 at 12:51:47:
John,
Thanks for the input. That’s what I had in mind. It’s time to execute the plan.
Again, thanks.
Johnman
Re: A SELLERS’ QUESTION/CONCERN!! - Posted by Doug
Posted by Doug on December 18, 1998 at 16:08:58:
Thats correct but we were talking about if he didnt assume the loan and paid the back payments on the note and left the Mortgage in the sellers name but wanted to have the seller transfer title to him…Anyway John has a good Idea on how to finish this deal up with a land trust…
Doug
notes4sale@yahoo.com
Re: A SELLERS’ QUESTION/CONCERN!! - Posted by Johnman
Posted by Johnman on December 18, 1998 at 12:54:34:
Joey,
I forgot to mention that the loan is a qualifying assumption. Sorry.
Johnman
Re: A SELLERS’ QUESTION/CONCERN!! - Posted by Brad Crouch
Posted by Brad Crouch on December 18, 1998 at 03:02:10:
Joey,
As far as I know, all mortgages are assumable. What Johnman didn’t specify was whether the mortgage was a “non-qualifying” assumable or a “qualifying” assumable.
Non-qualifying mortgages are prior to March 1, 1988 if they are VA loans, and prior to December 15, 1989 if they are FHA loans.
Institutional loans created after that contain the dreaded “due on sale” clauses, which means they are still “assumable” at the option of the lender, but a new buyer will have to jump through all the hoops and qualify the same as if he/she were taking out a new loan.
If a new buyer qualifies and assumes an existing loan, the original borrower is released from further obligation, and the loan no longer shows up on his/her credit report.
Brad
Re: A SELLERS’ QUESTION/CONCERN!! - Posted by johnman
Posted by johnman on December 17, 1998 at 22:58:35:
I like it!!! I’ll remember that.
Thanks,
Johnman
Re: A SELLERS’ QUESTION/CONCERN!! - Posted by Doug
Posted by Doug on December 17, 1998 at 21:35:30:
Cook is right and makes some great points here John…
Nicely put Cook…
Doug