Subject To, on a Contract for Deed? - Posted by David Alexander


#1

Posted by Irwin on December 13, 1998 at 23:02:48:

By non-personal note, I don’t mean unsecured. I mean one on which the holder cannot pursue you personally. All he could do would be to execute against your interest in the contract. In other words he would be secured by the property, but only by the propertyl.

Also, if you plan to negotiate a discount on the note, won’t you have to negotiate a payoff on the balance of the contract, subject to the assumption of the mortgage first?


#2

Subject To, on a Contract for Deed? - Posted by David Alexander

Posted by David Alexander on December 10, 1998 at 24:33:54:

I have a house under contract that was bought with a Contract for Deed, gonna take it over, what should I do
different since this isn’t a normal Note, and Deed of Trust.

I want to take it subject to in a Land Trust.

Ultimately, latter on down the road I would like to cash out
the underlying at a discount.

Just want to make sure I’m protected.

Thanks,

David Alexander


#3

Re: Subject To, on a Contract for Deed? - Posted by Irwin

Posted by Irwin on December 10, 1998 at 06:43:21:

You haven’t provided enough facts about this transaction. All I can say is read the contract, and understand it’s terms. Do a title search. Verify the payoff balance and assignability with the seller. Then if you still don’t know exactly what to do, seek legal advice.


#4

Exit Strategy - Posted by David Alexander

Posted by David Alexander on December 13, 1998 at 01:06:39:

Guess, what I’m asking is what exit strategy?

Details are as follows:
33k balance on Contract for Deed, comps are 43k.
Owner financed would sell for 48-52.
payments 340\PITI, currently rented 475\month
3 months left on the lease.
Seller wanted 2k to walk, I’m told him I’d give it to him like this, 800 up front(which will actually only be 500 because there is a 300 dollar deposit from the renters he would have to assign me), and he carries a note 1200, no payments, no interest, that I payoff within three years. The Contract for Deed is wrapped
around a mortgage that was taken Subject To. There is a Due On Sale Clause in the Contract for Deed. The Investor that has the contract is local.

I’ve thought about just lease optioning it as thats not
covered in the DOS Clause. Then due my best to actually get someone to qualify for an 80-85% mortgage
of better. Whike I’m at it I thought I might try to
option up the CoD at a discount.

What would you do? I know 10k isn’t alot of room, but
hey 10k transactions will work for me just fine.

David Alexander


#5

Re: Exit Strategy - Posted by Irwin

Posted by Irwin on December 13, 1998 at 10:31:16:

The only exit strategy I see might be to get your seller to take the $1,200 on a non-personal note in the event that the land contract balance gets called. Then you’re down to a max. $800 risk if you’re forced out by a foreclosure.
Maybe you should ask the land contract seller to approve the assignment to you in advance. Show him what you’re going to do to fix the place up and increase the value. Chances are, he doesn’t want it back,and would just as soon have you take over the contract. I wouldn’t get too fancy on a contract sale with a mortgage wrapped in it. You’ll be low man on the equity totem pole if anything goes wrong along the way.
In other words keep it simple so everyone knows “who’s on first”.


#6

Re: Exit Strategy - Posted by David Alexander

Posted by David Alexander on December 13, 1998 at 14:28:14:

Yes, the promissory note he is taking is going to be unsecured. Already told him that. I was afraid of approaching the guy to assume the Contract for Deed
because that might jeopardize my ability to get discount on the note. Also, he might want me to actually go through a formal assumption of some sort.
I don’t want any extra liability if I don’t have to.

Thanks for your input.

David Alexander