Posted by BRnBA on March 11, 1999 at 14:22:26:
(nt)
one more… - Posted by rayrick
Posted by rayrick on March 11, 1999 at 10:07:34:
Just thought of another “subject to” question. Can someone give me the rundown on what a Seller needs to do to obtain new financing (for some other house) after they’ve just sold their house to you “subject to?” I’ve heard they can typically get 75% credit for your payments, like a rental. Is this standard? What do they need to show their new lender to verify that you are making their payments? Your contract? Payment receipts? Thanks.
I’m trying to arm myself with the answers to questions before they come up. I hate going “deer in the headlights” on 'em!
-Ray
Re: one more… - Posted by David In Seattle
Posted by David In Seattle on March 11, 1999 at 23:03:43:
The short answer is if the seller still has the loan in their name “ie sold subject to” then they can claim the income from the new buyer at a 75% rate. Lender will want to see the contract and most likely some type of proof the payments are being made, ie canceled checks, copy of bank deposits which match the amount, bank statements that match the amount.
Lets see what the long answer is and most likely much more creative from Bill.
Re: one more… - Posted by Bud Branstetter
Posted by Bud Branstetter on March 11, 1999 at 18:48:49:
Bill Gatten may suggest his Pac Trust but the rest of the world will suggest doing the sale as a contract for deed. Most mortgage companies will count a contract as a sale and it becomes nuetral like a sale.
Re: one more… - Posted by Bill Gatten
Posted by Bill Gatten on March 11, 1999 at 13:54:08:
Ray,
I’ll be seeing you in an hour and a half. Ask then and boy do I have a good answer.
Bill
Re: one more… - Posted by Bill Gatten
Posted by Bill Gatten on March 12, 1999 at 15:31:21:
Thanks for the note of confidence David.
Re. Bud’s note, I most certainly would suggest a Contract Sale in these cases.
However, for that eeensy weensy tiny little minority who would like another alternative… I find that not selling the property, but leasing it to a co-beneficiary in a (pardon the expression) “land trust” for 150% more than normal rent makes the new lender more comfortable, since doing so gives the “tenant” enough tax and appreciation benefits that he can pay much more than rent, and eliminate the new borrowers potential for negative CF, Mtce Costs, Mangmnt costs and vacancies (without embroiling anyone in potential litgiation if the subject-to buyer defaults). The lenders I’ve worked with (particularly here in CA) have all given up 100% Debt to Income Ratio credit (so far… knock on wood). However, even if they didn’t: 75% of 150% more rent, is a larger number than 100% of normal rent(??).
We have a form letter we send upon request to such new lenders, which explains their borrower’s arrangement with their old property, and which has (thus far) made them OK with a 100% Debt to Income credit.
Another good answer to this this question…Contract for Sale (Bud, don’t hate me because I’m beautiful!).
Bill
Re: one more… - Posted by MC (CA)
Posted by MC (CA) on March 11, 1999 at 17:40:14:
Yeah, Bill. I’d like to know too!