NEED Advice on Assumption Deal... - Posted by Rod

Posted by Stacy (AZ) on May 19, 1999 at 14:50:59:

Yes, deeding into a Land Trust is the preferred way, with him as the beneficiary and using your trustee. Then he should assign the beneficial interest to you (but don’t record this part).

The art of negotiating…there’s no pat answer, but here’s my opinion. I propose that deeding you the property is your going-in solution to this problem. Don’t mention any other solution, yet. Assure him that you will take over his problem, and make the payments on his underlying loan. You are in this to make a profit, and you would not be able to succeed if you let the loan go into default. It’s in your best interest, and his, to keep the loan current. If you had references, you could use them if he asked, but it sounds as though this is your first deal. Put the proposal on the table. If he doesn’t like it, ask him why, and try to come-up with solutions and reassurances for his issues. If he’s concerned that you don’t have anything to lose, you may even want to consider fronting him some money for his deeding to you. Depending how much you’re willing to risk on this deal, you may offer him $500 or $1000 up front if he deeds the property to you. This seems like a very small risk for all that equity.

But, maybe he just won’t do it. That’s fine, go to step 2. Tell him you’ll sign a wrap-mortgage or an AITD (whatever it takes in your state) for the amount of his note, and exact wrap. That way legal title doesn’t get to you until the underlying loan is paid off. Note, you could use a Land Contract if he insists, but this places you in a weaker position. Get the Deed signed and in escrow if you use the Land Contract.

Rod, keep in mind that this is just my opinion of how I would aproach the deal. There are other ways to do this, and it sounds (from your brief description) that this is a deal to go for. If I was you, and the deal is as good as it sounds, I’d get something signed ASAP.

Good luck-


NEED Advice on Assumption Deal… - Posted by Rod

Posted by Rod on May 18, 1999 at 20:23:17:

I have a motivated seller who wants someone to take this property off his hands. He only wants someone to assume the loan and he will pay all closing cost. The property is 2 story with basement (WASH DC Rowhouse or townhouse) 2200 sqft, 3BR/2Full baths, hardwood floors. It only needs paint and some drywall work from bad roof a few years ago, kithen and baths upgraded. The mortgage balance is $87,500 with a note of $882.00. He had it assessed recently by the city for $101000. Comps in the area about 110k-120K. He wants nothing down. He currently has four tenants occupying the place that are month to month. He said he has given them notice that they will have to move once the property is under contract.

Sooooo, Should I put it under contract and flip it at closing. How can I make money on this house???


Does anyone suggest renting the rooms? - Posted by Rod

Posted by Rod on May 19, 1999 at 08:23:15:

To cover the mortgage and have pos cash flow? Are there negatives to this besides landlording?

Re: While you are at it… - Posted by Stacy (AZ)

Posted by Stacy (AZ) on May 18, 1999 at 22:33:34:

Go for the deed, first. If he’s open to allowing the current note to stay in his name, with you making his payments (which is what he’d have to do with an exact wrap or L/O), start off the negotiations with him signing the deed over to you. If he won’t do it, you can offer the other approaches. Second: subject-to. Third; Lease/Option. Last resort: straight option.

My opinion.


Re: NEED Advice on Assumption Deal… - Posted by SCook85

Posted by SCook85 on May 18, 1999 at 22:12:13:

I’m sure the seller has on his mind for you to actually go to the bank to assume the mortgage. The way that you should try to structure this deal is to take the home subject to the existing mortgage of L/O from the seller. You can tell the seller that if he will consider one of these 2 approaches he can save money on the closing costs. If he will agree to letting you take possesion of the home under one of these methods then you will have a much easier time of moving the property and with no risk to you.


Re: Does anyone suggest renting the rooms? - Posted by Stacy (AZ)

Posted by Stacy (AZ) on May 19, 1999 at 18:18:32:

I’m allergic to tenants…the ones I have to deal with anyway. Been there, done that. Having someone else manage the property, on the other hand, is fine with me. I’m wondering if you could give someone discounted rent to manage the property? I’m not sure if it makes economic sense, but you could play with the numbers. There’s a new “how-to” article posted here that speaks of the gold-mine of short term tenants when owning motels, and having an on-site manager take care of the everyday business. This is the only way I would keep this property.

Otherwise, I’d try to retail the thing ASAP, with owner financing, on Land Contract. I agree with some of the experts that recommend those new to REI do not become landlords the first year.

My take-


Re: Does anyone suggest renting the rooms? - Posted by Bert G (ND)

Posted by Bert G (ND) on May 19, 1999 at 16:06:24:

Room rentals seem to draw a more transient clientelle than apartments. However, if you’re up to the challenge, it can help with the bills. I have a friend who owns an old behemoth in the not-so-nice (ok, almost war zone0 of Minneapolis, lives in the attic and rents out 8 rooms by the week. He’s basically living for free.

Two things you must do first. Check with the city for code compliance, and rent the video “Pacific Heights”.


Re: Deed it to me? Subject to?? - Posted by Rod

Posted by Rod on May 19, 1999 at 08:14:46:

Could you go into more detail on the advantages of deeding the property to me. “Also the subject to”. Thanks for the info, this newbie just needs a little more detail.

Re: Deed it to me? Subject to?? - Posted by Stacy (AZ)

Posted by Stacy (AZ) on May 19, 1999 at 13:12:27:

Rod, I guess I’d have to recommend that you learn how to do these things before trying to use them. It would be impossible for me to detail the how-to’s and what-if’s in a post. There are some excellent courses offered here, such as Bronchick’s “Cash Cow” or LeGrand’s “For Sale By Owner” course.

Generally, any time you can get the deed to a property with little or no money, you should seriously consider it. Someone is giving you legal title and control of a property without you personally guaranteeing any loans. Low to no risk, high control. If there is an underlying loan, this is a form of a “subject-to” deal. You own the property subject to the underlying loan. You have to be cautious of the Due On Sale clause, and take appropriate actions in this regard.

You may also want to consider Bill Gatten’s PacTrust course, since the goal of the PacTrust is to enable you to take over properties “subject to” without threat of the Due On Sale clause police knocking on your door. I haven’t seen his course, personally.

To be more clear on option 2, if the seller doesn’t want to convey legal title to you by deeding the property to you until the underlying loan is satisfied, you could use an Installment Land Contract, All Inclusive Trust Deed or Wrap-around Mortgage for the exact amount of his payments…an exact wrap. This way the legal title will stay either in his name or in trust until the underlying loan is paid-off.

Sorry this is so general. Also, each state’s laws vary.


Who holds the mortgage? - Posted by Michael Murray

Posted by Michael Murray on May 20, 1999 at 16:43:43:

Hi Stacy,
I have seen various posts regarding having the seller deed the property over to someone else. The deed to my house is held by the bank. Isn’t that the typical condition? How does the seller sign it over if it is not in their possession?
Michael Murray

Re: How can I put the seller at ease with deeding it ? - Posted by Rod

Posted by Rod on May 19, 1999 at 14:09:09:

What are some ways I could put the seller at ease with deeding the property to me.

Will deeding it to a land trust work also?

Re: How can I put the seller at ease with deeding it ? - Posted by David Alexander

Posted by David Alexander on May 19, 1999 at 17:14:07:

Don’t over explain it for one. Just go into it as this is the way you do business(No big Deal). I tell them that my is what I do for a living to put beans on the table. I also say I will try to help the people get refinanced as this my business, and I don’t really see my profit until I do. I go further and say I can’t guarantee that the property will be refinanced but, will work towards it. And since this is my business I have a Interest in seeing that the payments are made to make sure I see my profit.

Works for me.

David Alexander