Posted by JohnB_NJ on February 03, 2000 at 18:53:54:
I am not an expert but this is what I have been taught and have used in the past on my “subject to” deals. First, are you planning on flipping the property (retailing it) or are you going to lease or lease/option it?
The reason I ask is that if you are going to lease it you need a Landlord policy.
But the main thing that needs to be done is have the trustee listed on the policy as the “loss Payee”. Also have the benificiaries listed as “additional insureds” for Liability purposes.
So, for instance on my first “subject to” deal, my exit stategy was to lease/option it (since there was not that much equity) but I needed a Landlord policy. So, I had the owner have the policy changed to a landlord policy and then afterwards we sent the insurance company a letter informing them that the title was being transfered into a revocable, intervivos trust.
Again, I listed the trustee as “Loss Payee” and the original owners plus myself as additional insured for liability.
So far so good.
Now, on my second subject to there is over $30k of equity in the property and I had to bring the owners payments current so I have $4k invested. Since I am retailing this baby, I just left the original policy as a Owner Occ. and had the Insurance company make the changes for Loss Payee and Additionally insured.
Oh, btw, I also get the owner to sign a limited power of attorney that allows me to sign any insurance checks that come in their name (just in case) and any escrow overage checks (especially when I sell the place i want the escrow moneies).
So, that is what I have done. But these where first mortages. I have heard that equity lines can be called in fast when they discover a transfer. I am not to sure about the loan are refering too.
Good luck and good investing.
PS: If anyone does it different, i would love to learn new techniques as well. Again, I am still learning.