Posted by ToolBar_SC on July 12, 2002 at 14:59:27:
I don’t know where you’ve read what you’ve described here but the bottom line is: If you get a loan in your name it will stay in your name until the loan is retired or the creditor agrees to the substatution of liability.
If you sell Subject To and your buyer defaults the creditor with the defaulting loan doesn’t care at all about your buyer. They are looking to YOU, the one who they entered into a contractural agreement with, for payments. And it’s your credit ruined if the loan defaults not your buyers.
Now as far as getting additional loans, yes a letter explaining the ‘Subject To’ deal(along with payment records, etc…) will be taken into account when determing wheither or not you will qualify for an additional loan.
I?ve read several times about a ?safety valve? for a seller in a ?subject to? deal. It goes like this:
-The seller sells the property.
-The sellers leaves a lien against the property in the sellers name (let?s assume this is the only option)
-The buyer, or a subsequent buyer, defaults on the loan
-The seller desires to buy another property, again necessitating a new personal loan (let?s assume that a new loan is the only option)
-The seller, in order to save his credit and get the loan, writes a letter to credit agencies and potential lenders, to explain the situation, i.e. a buyer, not the seller defaulted on the original loan
-Lenders take the situation into account, and the seller is still able to obtain a favorable loan
Does anyone have any first hand experience, or solid knowledge, about a scenario similar to that outlined above?
My concern is that for various reasons I may need to get a new loan on a property that will be used for a commercial venture. I would like to get the lien clear of my name ASAP in case the biz fails. I?m thinking that after the loan is seasoned for a few months I could sell the property, subject to, to a business entity and hopefully protect my credit should the biz eventually fail.