Re: Question about LeGrand and subject-to deals - Posted by B.L.Renfrow
Posted by B.L.Renfrow on December 10, 2000 at 10:39:07:
I never leave the “seller’s credit and name out there with some other buyer.” Yes, I have heard other investors say they just sell their beneficial interest and then they are out of the picture, but I would not feel right about leaving my generally unsophisticated sellers in that position – unless you’re utilizing the PACTrust, where it’s not an issue.
But when I take a property subject-to, I’ll either L/O to my tenant-buyer, or sell on a land contract. Either way, the payments come to me, not to the underlying loan-holder. That way, if there is ever a problem, I’ll be the first to know, and I can make sure the loan gets paid. Can you imagine how your seller would feel if you had bailed out of the deal, where the loan was still in their name, and your buyer defaulted? They would have no idea what to do.
As for how sellers feel about it, that varies. Some seem to never give it another thought once the property is out of their name, but the majority of my subject-to sellers are anxious to have the underlying loan paid off at some point. Although I carefully explain to them that I cannot and will not guarantee when that will occur, most of them keep in touch and inquire from time to time about the situation. In cases where it seems to be a major concern, I’ll either include a balloon or offer some other incentive for my buyer to refinance.
With sellers who are particularly credit-conscious, I have successfully pacified them by pointing out how they can use the lender’s 800 number or web site to monitor the status of their loan and my payments.
I do have one seller who takes that a bit far, however. She apparently monitors the underlying loan on a DAILY basis, and keeps a minutely-detailed history on her computer. I got a blistering fax from her recently, after I made a payment a few days late. Of course, it was my fault, and I apologized and acknowledged my error, but I have flagged this one as one to “encourage” my buyer to re-fi sooner rather than later, now that I know she is so obsessive about it! However, that’s the exception and not the rule with subject-to deals. I tell that story only to illustrate that sellers, while they may be desperate, don’t always disappear quietly into the background once you have solved their problem.