Subject-to gone bad...Bronchick?? - Posted by Tim Jensen

Posted by Tim Jensen on January 18, 2001 at 20:39:11:


When I took the place over from the original seller the place was 3 months behind. So, the seller was going to lose the house anyways. However that is not the point.

I just want to get the problem resolved so that things will be smoothed over. I made a mistake and want to try and get it resolved ASAP!

Subject-to gone bad…Bronchick?? - Posted by Tim Jensen

Posted by Tim Jensen on January 17, 2001 at 15:08:52:


I did a deal where I took deed subject-to then sold the place to a tenant subject-to. I actually gave tenant the deed. I did this in a corporate name.

The tenant has not paid. for 5-6 months. The old owner called me and wants to know whats up. I spoke to my buyer about 2 months ago and suggested that I give her her money back. She told me that she would be talking to her attorney about it. I called him and left a message. He did not return my call.

I am wondering if the mortgage company foreclosues, does the mortgage company have any recourse against my corporation. or me?



Re: Subject-to gone bad…Bronchick?? - Posted by Ed Copp (OH)

Posted by Ed Copp (OH) on January 17, 2001 at 18:46:43:


It depends on the wording on the deed (when your corp took deed, subjedt to) whether or not you are obligated to the note. Most likely you are not.

I hate to admit it but something similar happened to me a number of years ago. I took title subject to, (but did not “agree to pay”) the note. “Agree to pay” is key wording. The bank took the deal to sheriffs sale. I was listed as a person “who may have an interest”. I did have some interest. I had gotten $4,000 down payment and had sold the house on a land contract. Total sale price was less than $20,000. This means that the new buyer had more than 20% equity, and therefore the matter had to go to forclosure (under Ohio law). At any rate I did not have to pay anything, and I did not have to give any of the down payment back either. I must admit that I did not make any new friends either.

Jim suggests a lot of ways to do a cleaner deal in his post. The only thing that I do not agree with is “forcefully” attempting to get the deed back. That, in my town will probably get you shot, or at least shot at (I am difficult to hit when all you can see is my heels).

If I were a local judge I would take a strong look at piercing your corporate veil. I would have to ask if the corporation was just a tool to skirt the resopnsibily to the lender. But then again if the matter does not go before a judge this will not be an issue. I would do my very best to see that this issue got resolved without involving the court system. It is just too easy to be “the bad guy” especially if you are incorporated.

There is a lot to be learned here, thanks for the added lesson.; and better luck next time.

Re: Subject-to gone bad…Bronchick?? - Posted by JPiper

Posted by JPiper on January 17, 2001 at 17:37:24:


Hate to jump on a guy when he’s down, but in your case I’m going to make an exception! I don’t know why you didn’t call that retired federal judge that you know. You know the one…the one who told you that incorporating wouldn’t make a difference, and that you should rely on your insurance?

Anyway, now that I got THAT out of my system, I think JB is essentially right. The lender has no recourse against your corporation. But then again, the seller may have. Then again, he may not sue you once he finds out that your corporation doesn’t have much, and how difficult it is to pierce that corporate veil. (OK, I couldn’t resist it one more time).

But dam it Tim, why on earth did you do your deal this way? You could have sold with a contract for deed so that you could keep those payments up and kick the guy out when he didn’t pay. Or, you could have given the deed as you did, but retaining an interest in the property in the form of a second mortgage, which would now allow you to step in, bring the first current, and foreclose against your buyer.

All of this would have been less stressful for both you and the original seller, less expensive that the cost to defend yourself in a potential lawsuit, and certainly would have helped the seller to keep his credit from being trashed.

Reality is that at this point your buyer does not have to do anything. They can sit there without payment UNTIL the lender forecloses. Neither you or the seller can step forward to make payments since neither of you has an interest in the property.

I wouldn’t bother talking to her attorney. The reason he didn’t call you back may well have been that he hasn’t been retained by her. I’d go directly to her…and I’d FORCEFULLY demand the deed back. When and if you get it, I’d check to see if any OTHER liens have now attached to the property. If not, I’d record it, bring the loan current, and this time resell it the correct way. And Tim, I’d make a BIG priority of this, not just make a simple phone call and drop the whole thing. This is your mistake…do what you can to remedy it.

If additional liens have attached, I’d inform the seller and give him the option of taking the property so he can protect his credit. But inform him that there are now new liens.

Sorry for the experience Tim. This isn’t a pleasant one.


Re: Subject-to gone bad…Bronchick?? - Posted by JohnBoy

Posted by JohnBoy on January 17, 2001 at 15:41:24:


The way I understand it is that the lender would only have recourse against the original borrower. The borrower (seller) that you took the property from “subject to” would then have recourse against you or your corporation if that is what you took title in and signed off on. You would have recourse against the buyer you gave the property to “subject to”.

If you had the seller sign a release of liability when you turned the property over to your buyer, then the seller would only have recourse against your buyer. If you didn’t get a release of liability then it sounds like you may have a big mess on your hands.

I know it’s to late now, but why did you let your buyer take this over subject to from you? You should have either sold to them on a L/O or a contract for deed until they were able to refinance and pay off the underlying loan to get your seller off the hook.

I would show up at your buyer’s attorney’s office and try to get this resolved in a hurry. Assuming you didn’t get a release of liability signed off from the seller. Let that attorney know you intend to file a major lawsuit against the buyer immediately unless your buyer pays up or at least deeds the property back to you and vacates the property. Hopefully your buyer isn’t planning on filing a BK.

Re: Subject-to gone bad…Bronchick?? - Posted by JohnBoy

Posted by JohnBoy on January 17, 2001 at 20:02:36:

What would using a corporation have to do with skirting responsibility to the lender? It wouldn’t matter whether you took over subject to, personally or using a corp. You wouldn’t be liable to the lender regardless. You would only be liable to the seller for performing on your agreement with him/her.

Perhaps the Judge would ask if the corporation was just a tool to skirt responsibility to the seller, but it would have nothing to do with the lender. You didn’t sign anything or make any kind of agreement with the lender. So how could this have anything to do with the lender as far as your responsibility is concerned? The seller is the one that remains responsible to the lender. The seller is the one who signed on the note, not the buyer.

I’d be more concerned about what the seller will do in this case, not the lender. The lender will go after the seller. It’s the damages the seller incurs over this resulting from the buyers default on their agreement that would be worrying me. The lender would be the least of my concern.

Point well taken! - Posted by Tim Jensen

Posted by Tim Jensen on January 18, 2001 at 20:32:12:


point well taken.

You are right I messed up. I have spoken to the woman before about and she told me that she wants to talk to her attorney. However, I am going to stop by this weekend and try it again.

If I can deed, what I plan on doing is seeing if the old owner will take the place back and I will make sure the paymenst are taken care of.

This is a mess!


Well done, JP, excellent (educational) post! - Posted by Randy M

Posted by Randy M on January 17, 2001 at 19:29:14: