Posted by Bill K. (AZ) on May 03, 1999 at 15:23:52:
Rick,
I disagree with your assessment that a DOS clause means that a buyer’s only option is to pay off the existing loan upon transfer of title.
I am closing on a property Wednesday with a DOS clause that I am taking over “subject to”. I wrote the offer that way, the title company accepted it that way, and the lender has provided documents to the title company that are allowing me to take over the loan “subject to”.
Now, I was prepared to payoff the current lender in case they insisted, but they didn’t. And, they are fully aware that a transfer of title is occurring as I have been in contact with the lender’s representative every 2-3 days to facilitate the closing.
So, be prepared to place new financing on a property with a DOS clause, but it doesn’t hurt to ask or proceed with a offer “subject to”. The lender may decide to waive the clause. It is totally up to them.
Bill K. (AZ)
Preforeclosure Deal…Help - Posted by Moe
Posted by Moe on May 03, 1999 at 11:41:13:
Hello:
Here’s a deal I’m working on & need help on the best way to structure it:
A seller has a house that’s behind on payments (3months) & is $3,500 behind on taxes. He bought the house 2 years ago with a conventional loan ($106,000). It hasn’t gone to default yet, but I’m sure it’s only a matter of weeks or probably days. He’s willing to allow me to assume the loan “subject to” & all he wants is $1,000 to get out.
The house has a remaining mortgage of $86,000, no liens or 2nds & the house fixed up is worth $130,000. It’s a 3br/2ba/2car garage/swimming pool with a HUGE yard. It will need minor facial repairs (paint, carpet,cleaning, minor yard work, & minor plumbing) probably about $3,000 in repairs.
So…I was thinking I have 2 choice: 1) I could assume the loan “subject to” the mortgage & just flip it or do a simultaneous close.
or 2) I could assume the loan “subject to”, but instead of flipping it, I could lease option it (can I do that in this case?)
– Do I need to contact the bank to make sure they would be ok with this? (Do I need to worry about the due on sale clause/acceleration clause?)
– What forms will I need (a purchase contract & what else?)
– What’s the best way to word the contract to protect me? — When does he sign the CYI form?
– How do I word the contract to give me an out in case I can’t get the money to bring the back payments current & to get his $1000? (Would the $1,000 be consideration in this contract or earnest money?)
Please help as this will be my first deal & please let me know of anything I should be aware of or any special documents I may need.
Thank You!!
Re: Preforeclosure Deal…Help - Posted by Rick
Posted by Rick on May 03, 1999 at 12:51:50:
Moe: First of all a mortgage that has a due on sale acceleration clause is NOT assumeable! It is only payable. And it is like it says DUE ON SALE. All of it. “Subject to” The mortgage will not work here. The cure for the DOS must take place. Other than that its sounds like a good property to do. But find another like this with no DOS clause.
If anyone dissagrees with this please reply as we could all use help and guidance in our Real Estate endevors.
Good Luck