subject to, wrap & impounds? - Posted by PaulB

Real Estate Investing Real Estate Law
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Posted by JPiper on February 13, 2000 at 11:40:40:

Paul:

Just an opinion?but I think you might get a better answer to these questions if you posted them separately?.so if this doesn?t answer them you might try that.

The way I would handle the ?wrap? situation is to pay the impounds myself, and collect them from the new buyer. In other words, just set up a situation that mirrors the underlying impound account. Make certain you have language that permits the changing of these impound amounts as the insurance and taxes change.

Whether you have a continuing liability on this second may well depend on the law in your state. California as an example has a ?one action rule?, which means that the lender may foreclose either judicially or non-judicially?.but not both. The implication therefore is that lenders foreclosing non-judicially in California cannot get a deficiency judgment, and must look only to the property for their remedy for default. Even if a lender in California forecloses judicially, no one who seller finances may collect a deficiency judgment on purchase money deeds of trust. Further, institutional lenders for properties of 4 units or less are not allowed to pursue deficiency judgments on purchase money in California. However for other cases than these, even in California lenders can pursue deficiency judgments.

In my state (Missouri), there is no ?one action rule?. A lender can pursue deficiency judgments on purchase money providing they go through the right steps. So the answer to your question is going to depend on the state law. Check with an attorney, not your broker.

Finally, in terms of the financing of your buyer, I would want a stipulation in the contract that provided for a requirement that the buyer to be issued approval quicker than 30+ days?.and upon that approval I might require the buyer to go ?hard??.that is, require a non-refundable deposit. In the event that you do this, you might also want to have this passed through to you?.since it may be difficult to get it out of the title company if the buyer backs out of the deal. Whether you can negotiate any of this with your buyer is another question.

JPiper

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subject to, wrap & impounds? - Posted by PaulB

Posted by PaulB on February 13, 2000 at 01:22:36:

Question? If I take title “subject to” and the sellers taxes and insurance are impounded, and I am going to sell on a wrap to my buyer, how do the taxes get paid, and by whom, and what happens to the impounds? I understand to have the seller change their insurance policy to a Landlord Policy and name me as additional insured, but the tax part of it is stumping me.

Clarification of this would help me. Thanks.

Also, I bought a commercial property using hard money, and the seller took back a second with a single payment balloon due in a few months. I have a new buyer that is willing to assume. My hard money lender will let him assume no problem, but does the second need to approve the assumption. My broker says this is a Purchase Money 2nd TD, and that my buyer can assume the second whether or not the holder of the second knows or not, because the only recourse he has is against the property, and not me personally. Is this correct, or do I still have some liability on the second if my buyer assumes it?

I am getting a pretty good down payment from my buyer and he is willing to assume the loan and then refi the property in a few months to payoff both the first and second… BTW, this is a major fixer property and I want out with the fewest headaches possible. My buyer has gold credit, but I don’t want to go through the 30+ days of waiting for his financing to go through, and his possible backing out. thoughts?