Questions about subject to... - Posted by Charity

Posted by JPiper on May 21, 2000 at 11:13:55:

Depends on the situation. In some cases I have had myself and/or entity added as additional insured on the existing policy. In the situation alluded to above, I’m getting an additional policy since I’m not buying from the original seller. The loan itself is at 7% interest…and therefore the effect of the additional policy is to raise the interest rate somewhat…at least that’s how I’m looking at it.


Questions about subject to… - Posted by Charity

Posted by Charity on May 20, 2000 at 20:36:56:

Can someone explain this to me? Does this not trigger the due on sale? Is this better than putting into a land trust and having the seller tranfer the beneficial interest to you? What is the good part of subject to and what does it do?


Re: Questions about subject to… - Posted by Steve-Atl

Posted by Steve-Atl on May 21, 2000 at 12:34:02:

The other responses are right…any transfer in title subject to the existing loan is a “violation” of the DOS, but so what? It only means that the lender has the right to call it due (if they find out about it). I know lenders that have been told that title has transferred but sit on their hands for the reasons Ed Garcia mentioned (performing loan, cost more to call it due, etc.).

They may “huff and puff” and threaten to call it due but it seldom happens if they are getting paid as agreed. I don’t worry about it. The way I see it, if one of the lenders of my subject to deals were to call it due, I would let them take it back, or refinance if I wanted to save the deal. Either way I’m OK.

The biggest benefit of subject to deals is getting ownership of properties without having to go get a new loan from a bank. It increases the number of deals you can do and it preserves your ability to refinance in case it does make sense to refinance one or two of them that have been called due.

Re: Questions about subject to… - Posted by Ed Garcia

Posted by Ed Garcia on May 21, 2000 at 10:58:57:


How are you? We’ll as you can see we meet again.
Charity, the last time I answered your post, it was about you and your husband Terry
adopting a child. As you know I worked with you and Terry, and the last time I had
contact with you, Terry had gone to visit with a child. I called you several times
both at your work and at home, to see if you got the child. If you get a chance, drop me
a line to tell me the out come, because I’d really like to know.

Now in response to this post. Jim Piper has given you a great explanation except for
a couple of things that I’d like to add.

I’m currently working with someone from my workshop, where the lender is calling the loan.
It happened so fast, that the only way the lender could have been notified, is because the insurance
company insuring the property, notified them. When the new buyer buys the property and adds
their insurance policy to the loan, the lender is notified. Now you know how the lender finds out.
In this particular case the deed hadn’t even been recorded yet.

In the case of the person I’m working with, The lender responded immediately because it’s a
Commercial loan. I agree with Jim Piper, in most cases, the lender is too large and backed up with
their daily grind to react.

Charity, I’ve said it before and I’ll say it now, other than commercial loans, I would not be
concerned about the DOS. In most cases I find it to be a lenders bluff. As Piper pointed out, it’s
much to costly for the lender to pursue it.

Can you imagine if a lender has X amount of accounts, and finds 103 accounts in violation of the
DOS. Let say those accounts average $100,000 per loan, which in my neck of the woods is way
to low, but lets figure nation wide. That would be $10,300,000. in out standing loans, that are
performing loans.(meaning that they’re current up to date on their payments).

Now the lender says, hey, lets spend a lot of money in our legal department (in many cases, more
money in legal fees, than the account generates in income) to get these performing loans paid off
and lose the revenue. Being in the business, I can tell you that will never happen.

Good luck to you and Terry, and I hope you got that child of your dreams,

Ed Garcia

Re: Questions about subject to… - Posted by JPiper

Posted by JPiper on May 21, 2000 at 09:33:47:

Let’s clarify something here. When you buy with a land trust you ARE buying subject to. The reason buying with a land trust does not trigger the due on sale clause is that deeding to a land trust is exempt by federal law.

However, the instant the seller assigns the beneficial interest in the trust to you…the DOS clause has been triggered. Since it’s a private transaction however the lender probably won’t know it.

Doing a subject to transaction without trust, and doing one with a trust, BOTH trigger the DOS clause.

Will buying without a trust create a problem for you with the lender? Well let’s face it, if you make the payments the odds are the lender won’t be checking the title to see who owns it will they? Can you imagine how time consuming and expensive that might be? Which ones might they check?

I don’t deed to a trust typically if my exit is to resell the house quickly and pay the loan off. I’m going to be out of the house anyway in a short period of time…so even if the loan was called it won’t effect me.

I have one now where I’m taking over a loan of $5K. I’m not deeding to a trust. So what if the lender calls this loan? But again, chances are that if the payments are made on time they won’t notice that title has been transferred.

To be safe though, probably the best policy is to deed to a trust.


Re: Questions about subject to… - Posted by Phillip

Posted by Phillip on May 21, 2000 at 11:30:57:

What then is the best way to be added on to the seller’s policy when doing a sandwich lease option deal without causing a possible DOS problem? Since I am not the owner of a property while handling a lease option deal how would I go about buying the insurance since I am not the owner?

Re: Questions about subject to… - Posted by BR

Posted by BR on May 21, 2000 at 10:12:27:

Jim, what about the insurance in a case where you don’t use a trust? Do you get your own policy?