Re: L/O Vs. Subject To - Posted by B.L.Renfrow
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.