Posted by BaldRepublican on July 14, 2003 at 20:37:23:
If they have paid down less than 20% of the purchase price through down payment and principal reduction, inside the first 5 yrs, then it’s a simple eviction in OH.
It’s a very misunderstood portion of the L/C laws in OH.
Sub-2…What do I need? - Posted by Kristy-AZ
Posted by Kristy-AZ on July 14, 2003 at 10:10:25:
Hi all,
I recently came across I can purchase Sub-2 or L/O. The owner just wants to walk away, no money or anything.
We usually buy all cash, however, this one would be better for a rental unit, and I wouldn’t have to come up with 10% down. The sellers are 3 months behind in payments but foreclosure hasn’t started yet. The house is in great shape, we wouldn’t have to do any repairs!
Mort. Balance = $105,800
Mo. pmts = 925.
Interest rate is 7.5%
Payments needed to bring current approx. $3100.
FMV of house is $125,000.
I want to get this tied up before the bank files foreclosure. Besides the purchase agreement, Warranty Deed, what else would you recommend I get? I will have my title compnay check the title. What about insurance?
I can sell this on a 2 year L/O for $135K.
Any info/support is greatly appreciated.
Kristy-AZ
Re: Sub-2…What do I need? - Posted by JT-IN
Posted by JT-IN on July 14, 2003 at 18:17:20:
Kristy:
Title Insurance may be a good idea. A title check does not indemnify you from Fraud, or a few other irregularities that can occur in a RE transfer.
You would surely want to have the Seller sign a durable power of Atty naming you as Atty in Fact to deal with business matters relating to the real proeprty. That way if something is foregotten you can sign on behalf of the Seller.
Not sure about AZ rules as to the use of a Land Trust. If there are no prohibiting factors, you may want to consider deeding the property in a Land Trust to maintain privacy of the deal. Also it does not clearly signify to the Lender that there has definitely been a transfer of title, as a Deed from them to you would. This may eliminate a Lender from invocing the DOS clause.
Seller acknowledgement that they understand that they are violating the DOS clause.
Kaisers… “The Best Darn Document” is recommended for additional disclosure to the seller, and acknowledgment from them that they are aware.
Good luck, it sounds like a very doable deal…
JT-IN
on insurance - Posted by ken in sc
Posted by ken in sc on July 14, 2003 at 13:00:33:
check with your agent of course, but I always get my own policy AND leave theirs in place. I get my own because theirs may be invalid as they do not own it anymore. I keep theirs so the DOS does not get triggered by the insurance company sending a cancellation to the mortgage company, and then I have to send mine in with my name on it.
Ken
on insurance - Posted by ken in sc
Posted by ken in sc on July 14, 2003 at 12:30:38:
check with your agent of course, but I always get my own policy AND leave theirs in place. I get my own because theirs may be invalid as they do not own it anymore. I keep theirs so the DOS does not get triggered by the insurance company sending a cancellation to the mortgage company, and then I have to send mine in with my name on it.
Ken
double check the amount due - Posted by rm
Posted by rm on July 14, 2003 at 12:00:47:
Have the seller sign a mortgage release request and fax it in to the mtg co.
Ask them yourself to make sure exactly how much is owed, and where it should be sent.
I’ve found that the amount to bring the loan current can fluctuate wildly- upwards, that is. You may find it necessary to arrange a forebearance agreement if the amount is higher than you’re willing to pay.
If everything checks out, overnight the payment.
Re: Sub-2…What do I need? - Posted by Investor-Rama
Posted by Investor-Rama on July 14, 2003 at 10:25:35:
Kristy,
Why do an LO, when a CFD is stronger, demands more down, takes you off the hook as a landlord, gives your proposition a lower payment (adding the option consideration inflates the price) etc.
I am also in AZ, and I cant for the life of me understand why one would choose an LO over a CFD?
Oh, and you really dont need any other paperwork since you are using a title company (which is another thing I dont do…we have everything online that the title company checks and what they are insuring anyway!!)
Re: on insurance - Posted by Jim FL
Posted by Jim FL on July 14, 2003 at 19:15:50:
Ken,
While I see the logic in your plan, the extra expense is hard to justify.
Especially here in my state where insurance rates are just plain crazy.
Rather than keep the old policy in place, go ahead and cancel it, getting a new one.
However, don’t list yourself as the insured.
List the trust, and its beneficiaries as they may appear, along with the lender.
This looks like, and very well may be an estate planning move, thus lenders will not mess with it.
In several years of buying houses this way, I always get a new policy, IF the old cannot be changed to a landlord policy, with the trust as the insured.
The only issue I ever had was an insurance agent telling me that his company could not list a trust?
He was wrong, I just went to another agent, with the same national company, and got a policy with them.
Since then, we use independent insurance agents for all policies, and get better rates and more flexibility.
Check out insurance agents locally, you might save some money, and increase your cash flow.
I moved over 2 dozen policies last year, and it really did make a nice difference.
Good luck,
Jim FL
Re: on insurance - Posted by jorge
Posted by jorge on July 16, 2003 at 24:04:48:
Who do you put down as beneficiary (I think that is the term)on the insurance you get? So if the house burns down, who does the insurance company pay? YOu or their lender?
Jorge
Re: Sub-2…What do I need? - Posted by eric-fl
Posted by eric-fl on July 14, 2003 at 11:59:57:
Well, one reason would be the tax deduction - L/O the property, and you get depreciation, but not so on a CFD. Also, a contract-for-deed is just that - a contract for the deed. Under the normal arrangement, they are in their until they either refinance or pay it off. With a lease/option, you can time-limit it to one year, three years, whatever, plus, you can make renewals dependent on meeting conditions, so if you have a PITA tenant, you can get rid of them simply by not renewing them. As for evictions, it costs about $300 to evict, and then you get a new tenant who can probably put another $3000 down in a month, sounds like a good cash-on-cash return to me.
If someone’s got 10% down, I’ll be happy to give them a CFD. But of course, anyone with that kind of cash available right now just goes and gets new financing anyway.
Isn’t the reason to use a L/O instead - Posted by John - Ohio
Posted by John - Ohio on July 14, 2003 at 11:14:25:
of a CFD that, if the buyer stops paying, it’s much easier and quicker to evict a nonpaying tenant/buyer than to foreclose on a owner/buyer?
I am correct about this? (Newbie question)
Re: on insurance - Posted by Chuck
Posted by Chuck on July 16, 2003 at 08:48:43:
You would be the insured on any casualty (homeowners/landlord) policy. However, if you have a mortgage on the property with a bank, they will require you to list them as either a co-insured or a “loss payee”. In the event of any claims against the policy, the check will be made payable to both you and the bank. In a total loss scenario, “most” banks will have you endorse the check, then they will hold the proceeds as collateral, and allow you to use the money for reconstruction purposes. They will not force you to pay off the mortgage in most circumstances.
Re: Isn’t the reason to use a L/O instead - Posted by Investor-Rama
Posted by Investor-Rama on July 14, 2003 at 11:45:45:
I dont see that reasoning. If you have the buyer sign a promissory note, then it pretty much gives you carte blanche to do whatever you need.
But to add to your thoughts…who would you rather have in your property…a tenant who has put little to no $$$ into the deal? Or a buyer who has more financial interest, is getting the int write off, knows they are owning, makes improvements and has a much higher % chance of following through with the contract than a tenant?
To me it is a no-brainer. And makes the most sense to bring in a stronger buyer, require more of a commitment and be less of a landlord and more of an investor.
Just a few thoughts.
Re: on insurance - Posted by Jorge
Posted by Jorge on July 16, 2003 at 16:32:37:
ok so if you have to put the lender as a loss payee won’t they be notified by the insurance company that they are being put down as a loss payee? So if you are taking the property subject 2, won’t that mess things up as far as trying to keep them unaware that you are taking the property subject 2?
Thanks,
JOrge
Re: Isn’t the reason to use a L/O instead - Posted by Investor (AZ)
Posted by Investor (AZ) on July 14, 2003 at 21:39:55:
You’re missing it. Selling on contract is dealer activity. Better be sure you are paying tax on all your profit in the year of sale, or you’ve got a surprise visit from your mean Uncle looming. Even if you do pay taxes on your profit in the year of sale, you are throwing away a huge portion of your profit in every deal.
Better wise up and consider lease/option.