Posted by chris-atl on October 18, 2003 at 14:33:06:
Why not try to go the Subject-to route first? If she says no, then try Agreement for Deed, at least you’ll still own the property. And to protect yourself from the seller flaking out on transfer of deed when you pay her off, just have her execute a warranty deed to be held in escrow until you pay her off. If she still doesn’t go for Agreement for deed, try Lease Option last. You do not own the property at with LO. So Sub-2 is the best route, then A for D, then LO. If none work, just move on.
Posted by Jake J. in MT on October 18, 2003 at 08:40:35:
I’ve been looking into Lease Optioning and purchasing Sub2:
In order to help out someone “in need”, couldn’t I offer to L/O their property from them instead of buying it ‘subject to’ (since many shy away from sub2)?
-In either case, the deed stays in their name, correct? (Just no ‘due on sale’ cluase to worry about with the L/O route)
-Also, in either case you are more or less taking over their mortgage payments. Could anyone clarify my confusion and give me the pros and cons of going one way or the other?
Thanks much.
Posted by B.L.Renfrow on October 18, 2003 at 08:52:19:
You wrote, “-In either case, the deed stays in their name, correct? (Just no ‘due on sale’ cluase to worry about with the L/O route)”
Wrong, and wrong. If you take title subject to the existing financing, the deed does not remain in the seller’s name. The property would be deeded to you, or ideally, your trust. You – or your trustee – would then be the owner.
As for the DOS clause and lease optioning, every modern mortgage instrument invokes the DOS clause in the event an option to purchase, or a lease of more than three years, is granted.
Take some time to search the archives here on lease optioning and subject to and read the advantages and risks of each. The main advantage of subject to is, you have the deed, therefore you have more control.
However, neither technique is without risk, and neither is recommended unless you have enough cash reserves to cover any unexpected vacancies, repairs, nonpaying tenants or any of the many other issues which can arise. Also, if you follow this path, you need to have a plan for what you would do in the unlikely event the loan would be called due.
Posted by phil fernandez on October 19, 2003 at 08:27:42:
I still prefer getting the deed in a subject to transaction. While there’s nothing wrong with a contract for deed, and I’ve done many, I still like the idea of the deed being in my hands instead of it being in escrow. And I’d never leave a deed in the hands of my seller in a contract for deed situation.