Posted by JPiper on March 18, 1999 at 01:18:07:
3AM on Sunday was a fleeting memory to me…as I recall. But I do remember meeting you. It was a pleasure.
JPiper
Subject to refused by Title Co - any luck - Posted by Brent
Posted by Brent on March 15, 1999 at 17:22:25:
I made an offer today to take over a FHA first mortgage and have the seller take back a small second. The property was listed through a real estate agent. The agent called and started going off on how it is impossible to take over an FHA loan “subject to” or even on a wrap because of new guidelines. She said that she called and spoke with 3 Title Co.'s and they all said the same thing. I was going to take Title in a Land Trust after reading Bronchecks course. She said that the Title Co’s said to her that if they did that they would not ever be allowed to do FHA loans again. Anyone ever have any similar situation? Success? If so what Title Company did you use? Any suggestions? Thanks.
Brent
I think this wins the award for longest thread! (nt) - Posted by Jason-DTX
Posted by Jason-DTX on March 18, 1999 at 12:00:21:
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Re: Subject to refused by Title Co - any luck - Posted by Irwin
Posted by Irwin on March 17, 1999 at 08:21:23:
I’m sure this is probably covered in a post below that I haven’t had time to read.
This Realtors either didn’t 'splain the transaction correctly, or didn’t understand what the title guy said to her. She might be in over her head. Title companies are interested in clear title and clear title only. They could care less about HUD guidelines on anything. THEY’RE NOT CLOSING THIS FOR A LENDER OR HUD. THEY’RE CLOSING FOR A PRIVATE SELLER AND BUYER, WITH A MORTGAGE ALREADY IN PLACE.
Ask for the name and phone numbers of the people she spoke to at the title companies and then either call them yourself, or preferably, have your attorney call them for an explanation.
FSBO’s and Close them yourself - Posted by Jason-DTX
Posted by Jason-DTX on March 16, 1999 at 21:18:44:
Why even bother with the hassle of a subject to deal with a realtor involved. There are plenty of FSBO’s with properies that are good for subjest to deals. Go for the easy deals and pass on it if a realtor is involved and causing problems. Isn’t that why we work for ourselves? so we don’t have to put up with this junk?
Also, subject to deals are very simple to close, why do you need a title company to be involved? I close most of my subject to deals in the seller’s living room or at my office.
Jason
Re: Subject to refused by Title Co - any luck - Posted by Jason-DTX
Posted by Jason-DTX on March 16, 1999 at 24:26:03:
Ask them to show you an assumptiopn packet from a loan. There are references to taking a loan subject to in the assumption package to warn the seller about subject to. Although its a warning for the seller it does state that a subject to deal can and does happen.
It will at least shed some light on the subject just to prove your agent wrong, then you can go find another agent.
I only use realtors for cash buys or owner financing deals with reasonable down payments. You will probably have better luck getting subject to deals from FSBOs. Even if your realtor understands that subject to deals can be done, they will usually bad mouth it to the seller.
Jason Windholz
Re: Subject to refused by Title Co - Posted by JPiper
Posted by JPiper on March 15, 1999 at 22:10:50:
One of the problems here is that you’re getting all your information second hand?..through an agent. Why not take this opportunity to ask your questions directly to the title company?
I can tell you this: I have done almost every “subject to” transaction I have ever done through a title company or an escrow company. I have used different title companies?.both large and small. I can tell you that the information you received from the agent and the title company is wrong.
But here’s another factor. When you do a subject to transaction the risk level is heightened for everyone?the buyer, the seller, and the title company. Why?? There’s a due on sale clause, and there is a risk, however small, that the violation of the clause will be detected, and then acted upon by the bank. If this were the case, it’s possible that the title company could become involved in a lawsuit. I know of some title companies who have chosen not to do these types of transactions. I know of some that won’t do land contracts. It’s a question of risk avoidance.
I also know of title companies who WILL do these transactions, and simply take steps to make certain that they have documents signed that CYA. Personally, I think it would be imperative to have these types of documents in place not just for title companies, but for everyone involved in the transaction.
Chances are this is where the title company is coming from. It’s time for you to make some phone calls to some title companies yourself. Find some info out directly from the horse’s mouth. There are no new guidelines from FHA. The title company is not going to be banned by FHA from closings on FHA loans. That’s baloney. But again, the title company will incur a risk beyond that of a more normal transaction. Discuss the transaction with several title companies in town, discuss the concerns they may have and solutions to those concerns.
Working through agents for these types of transactions is going to require you to educate the agent. Worse, you’re somehow going to need to educate the seller as well, because this type of agent certainly won’t. It’s easier to deal directly with the seller, with or without the agent. But one way or the other, you’re going to need to educate those that you’re doing transactions with. If you simply present this type of offer to an agent, with no education or explanation, I would expect it to go nowhere in a hurry. You need to control the process, select the appropriate title company, and then educate the parties involved.
JPiper
Re: Subject to refused by Title Co - any luck - Posted by Rob FL
Posted by Rob FL on March 15, 1999 at 20:18:36:
Actually these type of deals are usually done only with motivated / distressed sellers. In other words, it might be difficult to pull something like this off if you are involving a realtor or a title company unless they know about creative dealings.
just my .02
I have ONE question?? - Posted by Jim IL
Posted by Jim IL on March 15, 1999 at 17:35:10:
Did the agent ever give your offer to the seller?
If not, they need to, it is the LAW!
And then, call a “Chicago Title” office. They are in most cities and can do this.
Best of luck,
Jim
Re: Subject to refused by Title Co - any luck - Posted by Redline
Posted by Redline on March 16, 1999 at 12:49:08:
… and the reason the realtor will bad mouth it to the seller is because the realtor does represent the seller and their interests. And the truth is that “subject to” is risky and not at all beneficial to the seller. The realtor is required to tell them that much.
You could argue that if the person needs to move the house ASAP and is extremely motivated you’re doing them a favor, however it STILL would be their realtors job of telling them about the pitfalls. They could be sued afterwards if they DIDN’T tell them that!
RL
Re: Subject to refused by Title Co - Posted by karp
Posted by karp on March 16, 1999 at 16:55:00:
Hey Jim,
I don’t know all the details on this yet but one of the people I deal with at my title company said she was told not to do any subject-to’s by FHA and that FHA would come back after them.
Now she doesn’t own the company and may be very confused. I tried to call my friend who owns it and she was out…But I will follow up on this and post it. If anyone would know what is going on, she would.
Thanks,
karp
Re: Subject to refused by Title Co - any luck - Posted by JPiper
Posted by JPiper on March 16, 1999 at 16:38:50:
Here’s your quote: “And the truth is that “subject to” is risky and not at all beneficial to the seller. The realtor is required to tell them that much.”
My feeling would be that if you or a Realtor stated this in certain situations, you might have portrayed this inaccurately. Things are rarely this black and white.
Let’s start with whether this is beneficial to the seller. Certainly if the seller is relieved of the payments on his loan I think it would be a rare seller who wouldn’t regard this as beneficial. The question really revolves around whether the seller can know with any degree of confidence whether I can be counted on to reliably make those payments. What if I have put up a substantial cash down payment at the same time that I have assumed the seller’s loan subject to? While this doesn’t eliminate the seller’s risk, it certainly would reduce it in most seller’s eyes. What if I have a long history of having a) made loan payments b) made them on a timely basis c) never defaulted on a loan or had a foreclosure? Again, while this doesn’t eliminate completely the seller’s risk, doesn’t a history of not defaulting or making late payments lead to a conclusion this history will probably continue? If not, then the whole purpose of our credit reporting system would seem to be in jeopardy.
Can you think of any way that a seller might be able to allow you to take over his loan “subject to”, whereby you give him legal assurance that he can take this property back if you do default? I bet you could if you thought about it, thus mitigating some of the risk involved with a subject to transaction.
Let’s take another scenario. Let’s take a seller who for whatever reason is unable to sell his home for cash, quickly enough. As an alternative, to eliminate the burden of the payment, he rents the house out. Would you feel this is safer? He’s still on the loan, he’s still responsible. Only now he’s relying on a renter, with a renter’s mentality to pay him so that he can pay his loan payment. On top of that, he has now taken on additional responsibilities?.namely repairs and maintenance. Would a Realtor recommend this over a “subject to” transaction? And if so, why?
I can tell you that anyone who sells me a house via a “subject to” transaction has a very safe transaction. I would suggest that you give this issue some more thought?.you might come to a different conclusion.
JPiper
Re: Subject to refused by Title Co - any luck - Posted by JohnBoy
Posted by JohnBoy on March 16, 1999 at 14:21:24:
Wouldn’t that be more like the realtor giving legal advise without being a licensed attorney??
Shouldn’t they say something like, you should have your attorney review this offer before you accept it??
I think if realtors referred their clients to their attorney’s more often than the realtor playing attorney, more deals would come together and close.
Whether it’s beneficial to the seller or not will depend on the sellers circumstances. But either way, that should be up to the seller and the sellers attorney to decide, not the realtor.
Re: Subject to refused by Title Co - Posted by JPiper
Posted by JPiper on March 16, 1999 at 17:10:24:
Please do follow up and post.
I’ve done some recent “subject to” transactions with FHA loans, with no comments at all from the title company. Doesn’t mean they and I aren’t wrong though.
I’d be interested in the result of your inquiry.
JPiper
Re: Subject to refused by Title Co - any luck - Posted by Redline
Posted by Redline on March 16, 1999 at 20:43:47:
Uh-oh I’ve got the “big boys” on me now!!
Really though - I see your point but If I’m the typical seller I’m thinking … “credit report or no, if something happens to you and you stop paying then that creates a problem for me. I have to make sure this guy keeps paying on this loan or else I get hung! And if the payments DO stop then I have to foreclose!! Oh god!! He could tie me up for over a YEAR and I won’t even have possession of my own property! This guy will live for free on my dime!”.
Now, on the other hand you brought up renting. Renting is not for everyone but atleast sellers (owners) get somewhat of a feeling of control (even if it’s sometimes a false sense). The property still belongs to them and worst case in an eviction that takes a month or two … not a year or two. And they’ve also got security deposits to hang on to for damage so they feel pretty safe.
Jim, I’m just looking at this from the “everyday Joe Seller’s” angle. I understand and accept your point totally. You definately are doing this guy a favor by bailing him out of his situation but I still say … the fact remains that this guy is taking a risk by doing the transaction this way. No doubt about it. And it’s a risk that if I were his attorney, realtor or friend I would tell him NOT to UNLESS it was a last resort.
But maybe that’s the whole point.
Thanks Jim,
RL
Questions, questions, questions… - Posted by Jim Beavens
Posted by Jim Beavens on March 16, 1999 at 18:33:56:
Hi Jim,
You said:
“Can you think of any way that a seller might be able to allow you to take over his loan “subject to”, whereby you give him legal assurance that he can take this property back if you do default? I bet you could if you thought about it, thus mitigating some of the risk involved with a subject to transaction.”
The funny thing is, I HAVE thought about this, and for the most part have come up blank (I’m eagerly awaiting both LeGrand’s and Bronhick’s courses on this very subject, so bear with me).
The scenario that keeps running through my mind is that I stop making the payments, the bank forecloses and finds out some funny business was done with the title, calls the loan due and gets the house, all to the detriment of the original seller’s credit.
The one thing I can think of would be to create some sort of arrangement whereby if I fail to make a loan payment within 10 days of the due date (which the seller can find out about by calling and checking their loan balance every month), then the seller could proceed with foreclosure to get the house back himself. I’m guessing that there’s a window in between that first late payment and when the bank would start seriously looking into foreclosing, where the seller could step in and resume payments without any complications. I might even be willing to be held liable to the seller for a couple thousand dollars or so in the event they take the property back so they could make the payments for a couple months (this might be going overboard, though).
What I’m not sure about is how this arrangement would be structured. Would this be stipulated in the deed of trust? In the purchase contract? A separate performance mortgage? Do you personally give some kind of legal assurance? (perhaps something completely different?)
OK, I’ll stop now. I have a ton of questions, but will wait until I can go through some of the materials I’ve ordered, and then talk to an attorney, before asking more. You just happened to raise some issues that I’ve been pondering in my head ever since the convention.
Re: Subject to refused by Title Co - any luck - Posted by Redline
Posted by Redline on March 16, 1999 at 15:14:55:
I agree however the conversation probably goes something like this:
S: “What’s this subject to stuff about”?
R: “Well that’s when someone buys your property and your loan remains on the property and they make the payments”.
S: “Well isn’t that dangerous to me?”
R: “Yes”.
Here the realtor hasn’t practiced law, he’s answering the sellers questions with facts. The fact is, YES there is potential liability for a seller selling subject to. That’s not practice of law.
Now, don’t get me wrong - I’m not against subject to deals or the investors who do them. More power to them and I wish I was doing 10 a week … believe me. I’m just being realistic as to how this stuff works (at least from what I’ve seen).
Plus I’m not sure an attorney thrown into this mix wouldn’t screw up the deals much the same. I’ve seen enough attorney’s ruin good deals too!
RL
Okay here is the skinny - Posted by karp
Posted by karp on March 16, 1999 at 17:49:28:
I got in touch with the lady who owns the title company I use. Her policy is not do subject-to’s against an FHA loan as FHA has said “ANY title company that does this will have their license revoked and won’t be able to close or issue title insurance for any FHA loans.”
Now consider for some title companies that is most of their volume!
So, I asked her WHERE she go this info. She said it was a “general directive” that gets sent out. I asked her if it had ever been enforced and she said she had no idea but doubted it had.
One thing she did say was “The way they are getting us is we have to ask whether doing ONE subject to deal is worth the risk of possibly losing their FHA loans altogether.”
Now, the plot thickens. She also said in this directive was that a way the Title Companies could get around this is by doing a “lease option” for a period NOT greater than 3 years! No where the heck did that come from? Who knows…but it has FHA’s letterhead…
So I guess I am to understand sicne FHA (which should be shut down) can’r lean on borrowers to keep them helpless, they are leaning on Titlte Companies. But the reason for now ALLOWING a less than 3 year Lease Option is beyond me.
I will get, yet more information and post it as I find it…
Thanks,
karp
Re: Subject to refused by Title Co - any luck - Posted by Jason-DTX
Posted by Jason-DTX on March 17, 1999 at 18:14:26:
You’re right. The seller has to be motivated and at the point of using “a last resort”
I like to tell seller’s that I agree its not the best option, but how long can they wait around for a qualified buyer?
If they need something done ASAP then the “subject to”
may be the only option even if its not the best one.
Your credibility is what will make them do the deal. They know you are offering a solution and they really can’t wait for anything else.
This business is biult on motivated sellers, not the “everyday Joe” seller. When you come across a truelly motivated seller, its amazing. They don’t care about nothing but unloading their problem. They still suprise me in their actions.
Jason
Re: Questions, questions, questions… - Posted by Jason-DTX
Posted by Jason-DTX on March 16, 1999 at 21:05:00:
If you don’t feel confident that you can make payments on a subject to deal then you might need to wait until you get those courses before you do any.
You don’t want to give the seller that much power. What if the unexpected happens and you have just screwed yourself.
You need to be up-front with the seller and tell them that you will do your best to pay their payments but you can’t be liable if something happens. What if we have a nationwide recession or depression and the whole market falls out. You don’t want a bunch of seller’s coming after you for thousands of dollars and legal assurance that you freely offered.
I tell seller’s about my track record and that I’m a member of the Better Business Bureau. I have the experience to handle any problems that may arise and I’m up to date on the eviction and foreclosure laws in my area. They also know that, even though I act as a principle, I still have to deal with my Buyer’s. In the end they know that they have tried all their other options (FSBO and using a Realtor) and that I may be the best bet they have at this particular time.
Another idea would be to use some of your down payment money and pay an extra payment so that you are always 1 month ahead on the loan.
Yes, its possible for someone to take a seller to the cleaners and milk the property for free money without making payments. But if you do this you won’t be in business for long. If you’re an honest business person then the seller’s should take your word that you will do the deal right and you shouldn’t have to worry about not making payments.
Jason