Amazing! “Subject to” transactions must be rampant!
This does bring up some questions though. One wonders whether FHA would enforce this on a loan that is current.
Then I wonder what happens if my attorney deeds a property into a trust…and the title company writes insurance on this whether they have violated the policy.
In fact, I wonder if they sent my attorney this particular policy…I doubt it.
Then I wonder why a title insurance company just did a couple of these for me…didn’t they get the word?
Perhaps everyone should refrain from doing subject to transactions until this matter becomes clearer. Just give me a call and I’ll see if I can accomodate the problem for you.
Then I wonder why on earth anyone is using a title company for the purpose of a lease/option. Wonders never cease.
Let me know any additional information that you find.
Re: Questions, questions, questions… - Posted by Jim Beavens
Posted by Jim Beavens on March 17, 1999 at 12:03:48:
Not to worry, I have no intention of pursuing this route of property acquisition until I have read up on all the available materials and consulted an attorney.
My concern is with the fact that the first time somebody does one of these transactions, they have no track record, and so any assurances that payments will be made might not have much conviction behind them in the eyes of the seller. Jim mentioned the possibility of providing a legal assurance that the payments will be made, so my post was specifically addressing this issue, and if Jim or anybody else actually uses some sort of legal assurance.
Obviously one wouldn’t go about freely offering all sorts of arrangements that can hold you liable, but it seemed like a valid thing to have in your back pocket in case you’ve got a seller almost convinced on a really good deal.
I’m also thinking back to what LeGrand said at the convention: the question he always asks a seller is, “Would you sell me your house for what you owe on it?”, and he then proceeds to try to have the title signed over to him with no down payment. It sounds like most people here aren’t quite that aggressive, and offer a down payment to grease the skids a bit. I’m curious to see what LeGrand says about this in his materials, because a down payment seems to make more sense since you’re effectively offering to take some of the risk off of the seller’s shoulders.
I was just curious if there were any other alternatives to offering cash, or if that’s pretty much the route that most folks go (I’m also considering the possibility that if a seller gives any resistance at all to the idea of transferring title subject to, that one simply shifts gears and asks if they’re interested in a lease-option).
Yes I Agree,
No More subject to deals, especially in the Dallas area, You should call or email me before you take a deed from someone so that I can help you with a work around solution for your problem. LOL.
Re: Questions, questions, questions… - Posted by Jason-DTX
Posted by Jason-DTX on March 17, 1999 at 17:59:12:
Most of the sellers who will let you do a subject to deal are very motivated. They’re either in or out. Most of the sellers I’ve dealt with either don’t want to do a subject to deal or they do and they don’t really care about anything other than you solving their problems. They usually don’t ask about a track record, if you sound like you know what you are talking about, they believe you. They are MOTIVATED. If you start trying to do subject to deals with unmotivated sellers then they will be difficult to deal with. Most of the times I don’t give any cash to the seller, but sometimes I do in order to do the deal. Its a case by case situation.
I know of a couple of investors who have had sellers come back a year or two later and want their house back. The loans were current and the sellers got back on their feet and just wanted the house back. It can get ugly if you have a new buyer in the house.
I like to make sure my seller knows that they are selling the house and no longer have any ownership or control in the house. They have to trust you to do business with you. If you can’t make the deal work then there’s not much hope for it. You are an investor who does this for a living. What can the seller do if you can’t save the house. The sellers don’t know jack about real estate.
Now if the seller is hung up on not trusting you and thinking you might default just for the heck of it, then you should stop the deal. That type of seller is just going to cause problems from now on. Tell them no thanks and move on. There are plenty of motivated sellers out there that you can deal with. If the seller is difficult move on.
Legrand’s material is very good. You will like it and feel more comfortable after studing it.
Good Luck.
Jason
I think you could offer a performance deed of trust (non-recourse). Restrict the liability under this deed of trust to the house itself. All this does is give the seller a way to get the house back in the event of your default.
If you were to do this it’s as a last resort, and should be drawn up by an attorney so that your liabilities are limited to the house, and are consistent with the laws in your state.
I’ve got a question in response to … “I know of a couple of investors who have had sellers come back a year or two later and want their house back. The loans were current and the sellers got back on their feet and just wanted the house back. It can get ugly if you have a new buyer in the house.” …
What legal right do the sellers have in actually taking the property back when the “feel” ready to resume paying the mortgage and living in the house? If you transferred property in a trust, does that trust hold any legal weight? Are my new buyers left out in the cold? Should I start stockpiling my lawsuit reserves for this?
(Can some of you experienced investors check out my “VA workaround” post above when you get a chance? Much Appreciation!)
Sounds like you’ve got your method down pretty well.
I differ somewhat from your style. The way I see it, there are some sellers that are very motivated?.your style will work well there. There are some sellers who are not motivated?..no one’s style will work. Then there are a group of sellers inbetween?..one’s with questions that need to addressed in some manner. Your style?a kind of take or leave it attitude?.is not going to work well with them in my opinion.
There are legitimate problems that arise out of subject to transactions. Some of these can be addressed. This act of addressing those problems creates next to no risk on your part, and will shift some of these less than completely motivated seller’s to your camp. I’m willing to take those steps, when and if they’re necessary.
Re: Questions, questions, questions… - Posted by Jason-DTX
Posted by Jason-DTX on March 18, 1999 at 24:30:48:
The 2 guys I was talking about are doing subject to deals differentlly than everybody else. They make the seller a loan (in the amount of back payments in which they pay directly to the mortgage co.) and create a junior lien on the property. Then as second lienholders they have the seller give them a deed in lieu of foreclosure. Most banks accept this type of title transfer and that is how they get around the due on sale clause. These 2 guys do about 50 or so houses a year with this method.
I was talking with one of them and he told me that they had a couple of different sellers come back wanting their house back. One of the sellers filed a lawsuit to try and get the house back. I can’t remember all the details on how it turned out(I don’t think it was completely resolved at the time) but I can ask and find out.
The point I was trying to make was that I now like to make sure my sellers know that they don’t have any ownership or control in the house once the deal is done. I DON’T want to give them a preformance mortgage or anything else which might cause them to think they still have an interest in the house. As far as your question on the trust goes I don’t think they have any claim on the house once they sell it, but they can still sue you anyway. Even if you’re right you have to defend yourself. Here in Texas if your incorporated you have to have a lawyer to defend you, even in small claims court.
I used to use the Junior lien method also but now I think the land trust is the best way to do a subject to deal.
Jason
Re: Questions, questions, questions… - Posted by Jason-DTX
Posted by Jason-DTX on March 17, 1999 at 22:15:03:
I agree that there are some middle ground sellers that you can convince to to some subject to deals. I’ve tried that before and most of the time the sellers end up being a pain in my side after the deal is done.
Example: One lady calls her mortgage company every month and if the payment is not there by the first, then she will call my office several times a day. I pay my payments when I receive them from my buyers. They usually get to the mortgage company around the 5th-10th. She pesters me every day until it arrives at the mortgage company.
I think once someone is established in their business they can go after more of the middle ground sellers. They will be more apt to handle the quirky situations that may arise.
However for the newbies trying to do their first few deals then I think they should go for the easier deals with the really motivated sellers.
I guess everyone has their own little preferences for the way they like to do deals. Thats one thing I like about this board. I can hear everyone else’s opinion and sometimes I realize that their way is better. That’s what makes us all better investors - keeping up to date with all the new ideas and strategies that work.
Jason
P.S. It was nice meeting you at the convention. It was around 3:00 am on Sunday so you may not remember meeting me!!!