Posted by Stacy (AZ) on January 20, 2000 at 23:13:14:
Bob replied to me via email, and I hope he doesn’t mind me summarizing. He is buying new houses, never owned by anyone before. His two advisors (both lawyers who own their own title companies) agreed that title insurance wasn’t necessary.
This is the one case I considered safe before I posted my question, but I’m sure there are others. Scott, I’m guessing from your post that you have experience with title searches and an understanding beyond mine. Can you help me understand a little better? Do you, for example consider your search good enough, or maybe that the odds are so far against a title problem that you’re willing to accept the risk?
Any advice for me regarding title searches and insurance, having been doing this for only two years?
Got a call from seller who has a house worth $140k, owes $105k, and wants around $10k for his equity…First question: Is this a deal worth talking about, not for immediate profit but for keeping for a rental, or perhaps a L/O.
#2: If so, would the best way to go about it be to buy ‘subject to’ the existing loan? Seller is not interested in an L/O as he wants some cash.
#3: When buying subject to, how much control does that give the buyer? If I bought ‘subject to’, would I have the ability to refinance after a year or so?
Re: “Subject to” questions??? - Posted by Bob in Indy
Posted by Bob in Indy on January 20, 2000 at 10:15:57:
When you take a property ‘subject to’, you have the seller sign over the Deed to you (or your trust). You have control of the property and the mortgage stays in the sellers name. You are protected from the seller reselling the house or having judgements against the property since the deed is under your control. The seller is protected from you selling the property without paying off the mortgage, since most buyers would run a title search and see that the previous mortgage is still a lien.
You can refinance whenever you want to and have the financial ability to. The new lender will pay off the old note and put their note in first position.
Assuming that the house you described is in rentable condition, you may have found a pretty good deal. You can offer to take the property subject to, with no exchange of cash. However, if the seller wants $10,000 then give him a small amount now and the remainder when you find a L/O tenant. That tenant should come up with 3-5% of the asking price of the home. If the home truly is worth $145k in todays market then it should be worth $155 to $165 in 3 years under your option. That is the price that I would establish for the option.
Hope this helps.
The above situation assumes that the house is in a desireable area and that no major repairs are needed. Be sure to run a title check before recording your deed.
Posted by Stacy (AZ) on January 20, 2000 at 11:37:05:
Hi Bob-
I also do subject-to deals, and have been trying to keep track, on this board, of those who don’t buy title insurance. I also, initially, thought that foregoing title insurance was fine. I’ve received advice from, it seems, the majority of those who post here, that title insurance is a mandatory part of most deals. I’ve always purchased the policy, since with “investor rates” it’s a pretty small expense for the protection.
I’m not implying you are wrong. That’s not the point of this post at all…I’m not trying to play title policeman. I’d just like to hear your reasons for not buying the policy.
Or, maybe I misunderstood, and you do buy title insurance.