Help with subject to existing morgage offer - Posted by Jason Smathers

Posted by Redline on March 03, 2000 at 23:52:58:

I was curious to see how you were approaching the situation - and of course, what you plan on doing with the property makes a difference.

I have to defer, however to the others on the board about how to structure this the best way - some of them are alot more qualified than I. What you’re doing appears to be fine to me but as always I’m sure there’s a better way and I’m sure someone will post it shortly.

Good luck and keep us posted,
RL

Help with subject to existing morgage offer - Posted by Jason Smathers

Posted by Jason Smathers on March 03, 2000 at 23:17:49:

I am a newbie and need help with this offer:
PLease email me at JasonS2e@aol.com if you think I need to do anything different here. I am making the offer tomorow, so if this looks like I am going to get burned… PLEASE email me and let me know what to change.

I have an appointment tomorow with the seller and the seller’s listing agent. Seller is asking $117,000 and has an exisiting morgage on the property for $96,000. This is what I want to do:
put the house in a land trust.
transfer the interest of the trust into my name.
I begin making the payments on the house.
Pay the 6% to the listing agent in the form of a note.
If the seller gets greedy, I dont mind giving him a note also for a small ammount so he gets a little equity out of the property. I dont want to pay too much for the property, but the house is for myself and I like it a lot and dont mind paying fair value is the terms are right.

What I need to figure out is how to put this in an offer.
This is what I have ready…

  1. a promisary note ready to give to the RE agent, to be baid back over 5 years with 7% interest, the price not yet filled in.

  2. an offer to purchase stating in an addendium that the property is to be placed in a land trust, and the interest in the trust is to be transfered to my name. It also states the seller will write a letter to the morgage company stating they have done some estate planning and have placed they property in a land trust and I am the benifficary, therefore the payments will be coming from me.
    In the offer, it states that I will pay the RE agent 6% of the purchase price over 5 years with 7% interest.
    Then all the normall stuff…

  3. another promisary note made out to the seller with the ammount left blank, if they insist on getting $ out of the deal, I will fill in the price. This note is printed up over 7 years with 7% interest, paying 3% interest durring the term on the loan, then a baloon payment for the remaining 4% after the term of the loan.
    (Hopfully I dont need to use this)

Now its a wrap :wink: want to help? Re: Help with subject to existing morgage offer - Posted by Jason Smathers

Posted by Jason Smathers on March 04, 2000 at 15:35:46:

Well, thanks for all the help on this, but the RE agent gave me a bogus figure on the remaing $ of the loan. So, the offer I made to assume a $96,000 that was non existant, didn’t work to well :slight_smile: Turns out they only owe $20K.

Anyhow, they didn’t like my idea much, but told me that if I re-write my offer as a Wrap, they would accept.
Now, I am not sure how to write that in the offer…
Should I just state in an addendum that I will pay on X day of the month to an escrow company, then the escrow company shall pay the morgage payment to lender, then send X dollards to Seller.
Then write in the terms of the loan? Is that sufficant?

Re: Help with subject to existing morgage offer - Posted by Jim IL

Posted by Jim IL on March 04, 2000 at 24:28:30:

Jason,
First, to give you advice based on such limited info would not be prudent or possible.
But, here are some things that I observe;
First off, are the only signs that you took for motivation the words the RE agent said about willingness to be creative?
If so, for me that is not enough.
But, it never hurts to ask I suppose.

Secondly,
You do not want the seller writing that letter to the lender. you draft it, and have them sign it, and you send it.
Also, the letter to the lender need only say that the home was placed into a trust. you do not want to tell them who the beneficial interest is, especially when it is you.
that can cause the lender to call the loan. (DOS).
Have the seller place the home into a land trust, naming your choice as trustee, and the seller as beneficial interest.
Then, have a seperate form for assigning the beneficial interest to you.
this way the original trust docs name the seller as beneficial interest, and if the lender gets suspisicious, they can be shown the trust agreement, and see that the ben, int, is the seller, not you. You will keep your assignment form to yourself.

And, you will also need a letter to the insurance agent telling them the same things, but to add you as an “Additional insured” on the policy for liability purposes.

The notes to the RE agent, I don’t see them as flying, but I am skeptical about that stuff. My experience with agents is that they want to get paid, and paid NOW!

And lastly, why make yourself a bad deal just to live in a house you like?
Surely there are other homes you can like and get on a good term deal.

But, whatever you do, good luck, and make sure you do it right.

If you are not really comfortable with a “subject to” deal, perhaps a little more reading and studying is in order.

Good luck,
Jim IL

Re: Help with subject to existing morgage offer - Posted by Eddie FL

Posted by Eddie FL on March 03, 2000 at 23:56:06:

Jason,

I noticed that you said you will have the seller notify the bank that they did some estate planning and they are going to put their property in a Land Trust and that you are the beneficiary, well, what they really have to tell them is that you will be the “Trustee”. They will assign the beneficial interest to you without the bank or anyone else knowing. Please make sure you get all your ducks straight.

Good luck,

Eddie FL

Re: Help with subject to existing morgage offer - Posted by TomC (Md)

Posted by TomC (Md) on March 03, 2000 at 23:53:30:

Jason: I think you need to slow down a little, unless you have had some conversations already with either the seller or Realtor about this. Too much too soon while blow the whole thing up.

First, on asking an agent to take a note for the commission: If the agent is an employee of a brokerage, you might have a hard time with this. This is because up to 50% of the commision can go to the brokerage, not the agent. The agent may not be even able to get the boss to take a note. Your best shot on a “note for the commision” deal is a self-employed broker, who does not need to answer to anyone else.

Second, it sounds like you are revealing too much of the process if you try to explain it in the offer. Also, do you have any idea if $117K is a fair price. If so, tell us how.

Just for kicks, how about this for a scenario (And I’m assuming this may be your first meeting on this property and the property will appraise for 117K):

First, convince the seller that they have the property sold. Do this by offering a “normal” contract that the realtor is used to seeing. Maybe offer just enough to cover the mortgage balance and commission, like $103K. Tell them that you will apply for a mortgage 1st thing on Monday. Make sure to include finance and inspection “weasel” contingencies. Give them a check deposit for $500, but in the contract have the wording that the check is not to be deposited until removal of the inspection contingency. Act with confidence that this deal will happen just like they expect.

If they bite on an offer where they would walk away at settlement with no cash, then you may have something. And if they accept it without a counter, you may have a motivated seller.

If they do accept it, you have accomplished one thing. You have made the seller feel relieved, since the house is now sold. In thier mind, the house is off the market.

Now you wait a few days, and get back in touch with the seller/Realtor. Tell them you have some financing issues, and you need to meet with them. Don’t tell them what the issue is over the phone.

Tell them in person that the financing may not go through, and then mention the idea of you “taking over the payments”. Get a reaction to that. Again, do not mention all that “Land trust mumbo-jumbo” (That is what the seller would call it if you try to explain it.)

Only after they agree to the “taking over you payments” idea, do you start talking about the exact mechanics of the transaction. Even better would be for you to already know a attorney or title co. to tell them what to do as the closing process gets under way.

Well, it’s late and I still have work to do, so I’ll stop here. I hope this gives you some ideas, and maybe you will get some more input from others.

Best of luck,
TomC

Re: Help with subject to existing morgage offer - Posted by Redline

Posted by Redline on March 03, 2000 at 23:25:16:

Have you talked with the seller at all - is he/she motivated?

Do you have a reason to believe the agent is motivated enough to take a 5 year note on their commission?

Most importantly, what do you plan on doing with the place?

RL

Re: Help with subject to existing morgage offer - Posted by David Alexanader

Posted by David Alexanader on March 04, 2000 at 13:23:18:

Not true, I’m never trustee on my properties and I do not notify the bank that I’m putting the property into a trust. Simply deed the property to the trust, and at the same closing that the trust is created have the beneficial interest assigned to you.

David Alexander

Re: Help with subject to existing morgage offer - Posted by Jason

Posted by Jason on March 03, 2000 at 23:29:13:

The RE agent has told me, “we will be creative” and "please bring any offer."
I will live in the house.

Do you have any suggestions on how to structre this?

Re: Help with subject to existing morgage offer - Posted by David Alexander

Posted by David Alexander on March 04, 2000 at 13:30:45:

As redline said your moving way too fast. First and foremost find out if the seller is motivated, and why if you can (this means alot of listening and very little talking). Next find out what the property is really worth, does it need any repairs?

Dont go explaining them to them that your going to put the property into a trust etc, etc, you lose em. You simply tell them I’ll buy your property if I can take over payments, yada, yada.

Incidentally, I have never bought a property where I have had to give the seller more than 2k cash, when buying subject to.

David Alexander