Contract for deed or subject to? - Posted by Mary

Posted by Stacy (AZ) on January 31, 2000 at 20:29:35:

There was some advice a while back on this board, that I discovered is very true as I started to make deals. You will know a motivated seller when you find one.

My current subject-to deal is a couple that is behind three months, with the creditor calling them with threats, and their house needs about $6K before it could be “retailed”. I told them that I would like to pay-off their arrearage, give them an additional $3000 for moving money, and make their mortgage payments until I can rehab and resell…which may take a few months. Being this close to foreclosure, this was music to their ears. I told them about the “due-on-sale” clause, and the fact that their names would remain on the loan, and compared to their current dilemma, it seemed like no problem at all to them. Can you put yourself in their shoes, and understand why they would think this way? If I was n a jam like they are, I’d go for it too.

My last subject-to deal was an out-of-state mortgage broker of all things. Believe me, he understood the DOS clause, and subject-to…and all the ramifications. He had perfect credit, but was unable to manage this home from 1000 miles away, and was loosing $200 per month trying to rent it out. He allowed me to buy it subject-to, provided I set up a servicing account and gave him back a performance deed of trust, so he could make sure the payments were being made, and he could regain title if I paid late. It didn’t matter at all to me. I knew I’d make his payments, and I ended-up selling the property to a new-loan buyer (a real estate agent that wanted the house for herself) after making only one payment anyway. But without the performance mtg and servicing account, the seller wouldn’t have done the deal. He was motivated, and I recognized it, and worked to a solution that made him feel comfortable.

There is a world of difference dealing with a truly motivated seller. Show-up, pay attention, be truthful, and don’t be attached to the outcome. Some will work-out, some won’t. NEXT!


Contract for deed or subject to? - Posted by Mary

Posted by Mary on January 31, 2000 at 16:01:20:


Have this guy who just wants out of his house. After giving him my moving money offer he accepted. I went home and called the title company about taking this subject to his exisiting mortgage.

I must not understand this well enough. I thought I could put this property into a trust and begin making payments on the existing mortgage and have the owner sign over the deed to me. Perhaps you more experienced investors know this too well, but the title company who was refered to me out of my reo club said not so.

I must do this as a contract for deed, and title to the existing property won’t pass until I sell the property, because of the due on sale clause.

I’ve read a lot on this site and Bill’s and am confused about what I should do here. I’d appreciate some help. Thanks alot. Mary

Go for the Subject To - Posted by JohnWe (NoCA)

Posted by JohnWe (NoCA) on January 31, 2000 at 20:05:51:


As already suggested, you have a couple of options:

  1. Find a new title company (best choice)
  2. Educate your existing title company

If you’re going to be educating your title company, make sure you’re comfortable with the concepts before you walk in. If they feel you don’t know what you’re talking about, you’re gonna have trouble getting them to go along with it. From the post sounds like you might be a little confused on how the trust works. Here’s the steps:

  1. Have the seller create a trust
  2. Title the property to the trust
  3. Have the seller assign his interest in the trust to you.
  4. Notify the lender that as the trustee you would like all matters concerning the loan forwarded to you.

If it’s all the same to the seller, you should go for the Subject To. You’ll be in a much stronger position than if you go with a Land Contract. Only reason you would want to go with a Land Contract over taking a property Subject To, is because the seller won’t do a Subject To.

Hope that helps.

Re: Train them - Posted by Stacy (AZ)

Posted by Stacy (AZ) on January 31, 2000 at 16:36:02:

Look for a title company that understands, or is willing to listen to you. The first subject-to/land trust transaction I did required me to work with the title company, explain what I wanted to do, and field questions from the title company’s legal eagle before we were all OK. To my title rep’s surprise, his legal expert understood what I was trying to do, and agreed to insure these deals. Of course, some addition protection clauses are added to the title policy. For example, they want to ensure the seller realizes I am not assuming the underlying loans, and the risk of DOS violation. Well, that’s fine with me since I make sure the seller understands this before I even pen a contract. I also get their signature on a CYA letter. In other words, I had to help train my title rep for these deals.

Now that this title company has done so much to streamline their methods for me, it’s like an assembly line. And they knew that I would bring repeated business to them if they worked with me, or else they wouldn’t have taken the time.

So, I guess what I’m saying is, if you can’t find a title company that will do these, you may need to work with a good company to get what you want.

Good luck-


Re: Contract for deed or subject to? - Posted by Chris

Posted by Chris on January 31, 2000 at 16:33:00:


See about using a different title company. Many investors and hard money lenders will only do deals if their choice of title company to hold escrow is allowed because they are tired of educating title companies. Subject To is not that unusual. It is surprising that your RE club recommended them. To help locate a company that you can work with you may want to consider calling a hard money lender to see who they like to use. Try the ads in the paper that state something along the lines of “We buy houses, any condition.” Those types of investors use the type of title companies that you want to use.


DOS violation - Posted by d.moren

Posted by d.moren on January 31, 2000 at 19:31:35:

what do you say to the seller about the risk of the DOS clause? dm