Subject To? - Posted by JohnPa

Posted by Russ Sims on June 08, 2000 at 15:16:07:

Lonnie:
You can get a PofA on Bronchick’s site, legalwiz.com. Click “free forms” then click "limited power of attorney for real estate"
Russ

Subject To? - Posted by JohnPa

Posted by JohnPa on June 07, 2000 at 20:55:11:

I am confused by the term “subject to” that is so often used. Is purchasing a property “subject to”, designed to circumventing the DOS through the multi-dimensional trust/beneficiary arrangement or are you dealing directly with the bank and taking over the loan after qualifing and paying fees?

I’ve checked the archives and the books/materials I have and can not find a clear and concise answer.

Thank you in advance for your response.

JohnPa

Re: Subject To? - Posted by Redline

Posted by Redline on June 07, 2000 at 21:02:06:

Buying “subject to” means acquiring a property (you get the deed) but not assuming the mortgage. The seller remains on the mortgage.

RL

Re: Subject To? - Posted by JohnPa

Posted by JohnPa on June 08, 2000 at 05:56:24:

Thanks for the reply but I’m still confused. Is the bank aware of the deed transfer? Who makes the actual mortgage payment? Is an escrow agent used to make sure payments are made? What if the mortgagor fails to pay or goes into BK?

And lastly, when is a subject to purchase most often used?

Sorry for the ongoing questions but this subject has really been bugging me.

JohnPa

Re: Subject To? - Posted by Russ Sims

Posted by Russ Sims on June 08, 2000 at 11:51:30:

If you purchase “subject to”, the bank that holds the underlying loan could enforce the due on sale clause and call the loan due. To lessen the chance of that happening,you can put the property in a land trust, and notify the bank of such, saying that you, or someone you designate is the trustee, and that all further statements, correspondence, etc. should be sent to this trustee. You will have a limited power of attorney from the seller to allow you (or trustee) to sign documents pertaining to the property (like insurance and loan papers). The reason for this land trust is that by law, lenders cannot enforce a due on sale clause if property is deeded into a trust (they CAN enforce a due on sale clause if they find out the seller has assigned his beneficial interest over to another party).

As far as who makes the mortgage payments, the trustee does. That can be you, or your company, or anyone whom you designante as trustee.You can certainly set up a 3rd party escrow to handle these payments. It will cost a few bucks but it’s worth it.

As for your question of “what if a mortgagor fails to pay or goes into bankruptcy?”, well, the original mortgagor is not making the payments: the trustee is so it’s not an issue. If the mortgagor goes into bankruptcy, there is a chance that the loan will be wiped out by it. That could cause problems for you…see thread below dealing with that subject.

The sellers most open to the idea of a “subject to” sale are the one’s who aren’t looking to get any cash for equity upon sale. These will often be people that have lived in the home for 1 or 2 years and need to sell sooner than expected. Or perhaps they’ve lived in the home for a while, but they have refinanced to the point that all the equity is used up. These sellers just want out of the property without paying any cash out of pocket.
Hope this helps!
Russ

Thank you Russ for your clear explanation! (nt) - Posted by JohnPa

Posted by JohnPa on June 08, 2000 at 17:24:44:

.

Re: Subject To? - Posted by Lonnie Turner

Posted by Lonnie Turner on June 08, 2000 at 13:53:31:

Everyone keep saying that I need a power of Attorney when doing subject to delas. i have taken bronschick’s Cash cow course & his land trust biut this is not covered. Where did you guys find out about the need for a power of Attorney & how do I go about getting one that is already filled out? Did you guys get this from a course?

Lonnie Turner