BUYING ? SUBJECT TO? ? concerns and confusion ? - Posted by Paul

import · February 10, 2005, 10:49am

Posted by Bill H on February 11, 2005 at 13:07:38:

The Deed of Trust to Secure Assumption sounds very much like the Perfromance Deed of Trust that lots of guys and gals use. It is a deed of trust that says you have taken over the obligation and if you fail to perform they can foreclose.

The Assumption Warranty Deed is a Warranty Deed with the additional wording in it that you agree that you are taking over the financing and are agreeing to make the payments and are liable for them, etc.

Everyone is trying to avoid the Due on Sale Clause in the original deed of trust. There are about as many ways that have been tried as there are fleas on a dog’s back.

NO one—repeat NO ONE— has totally succeeded to date. There are lots of things you can do to hide the fact tht you have transferred title…none that I am aware of to date, have succeeded in preventing the lender from exercising their right to call the loan if they really want to play hardball.

In today’s market, with you taking over a higher interest rate loan the lenders normally do not exercise that right. However that does not mean that they do not have the right to do so and some are just hardballed enough to do so.

Good Luck,
Bill H

import · February 10, 2005, 10:49am

BUYING ? SUBJECT TO? ? concerns and confusion ? - Posted by Paul

Posted by Paul on February 10, 2005 at 11:49:43:

I would appreciate some feedback/advice from the legal pros …

I?m currently working through the Charlie and Randy France Course ? ?ABCs of SUBJECT TO?.

Listening to these tapes … and also to Ron LeGrand?s tapes on this subject … it seems like they don?t give any written guarantee to make the seller?s payment. (i.e. only a “moral” obligation).

At our local real estate investor’s meeting last night (I’m in Texas) an attorney spoke to the group and raised several concerns/dangers of liability when doing typical ?subject to? deals.

He suggested a revised, safer approach … either …

Create a wrap-around, non-recourse promissory note to the seller for the underlying loan balance, in addition to the regular paperwork.

(This would not entail formally assuming their loan, so risk of due of sale enforcement would still prevail). In the event of default on making their payments, this merely limits their remedy to foreclosing on you).

OR

Create a ?Deed of Trust to Secure Assumption? together with an ?Assumption Warranty Deed?.

He said this was 100% legal and he had actually done over 1,000 sub-2 deals in this manner.

Can you legal pros summarize what is the safest/best method to do ?sub2? deals in this day and age, when banks and financial institutions are scrutinizing everything?

Also any Texas investors out there already doing sub2 deals, and what experiences have you had?

Many thanks & Regards,
Paul

import · February 10, 2005, 9:10pm

Re: BUYING ? SUBJECT TO? - Posted by JohnBoy

Posted by JohnBoy on February 10, 2005 at 22:10:39:

I don’t know where this idea of not making any written agreement to make the seller’s payments on buying subject to their mortgage is coming from. Of course you are promissing to pay the seller’s mortgage payments! You need to still use a purchase agreement. The purchase agreement states YOU are buying the property subject to their existing mortgage(s)! That purchase agreement IS in writing and that agreement does obligate YOU to make the payments and/or pay off the loan.

If you don’t make the payments then the seller can sue you for breach of contract and damages for ruining their credit! There is nothing morally about it. You are legally liable to the seller to make their payments, period!

You’re not liable to the lender since you never signed the note and mortgage for the loan. But you most certainly are in fact legally liable to the seller to make their payments. That is what you contracted to do which is part of the purchase agreement.

This idea of not legally being liable to the seller and only being a moral obligation is plain BS!

Now what some investors are doing is buying under a corp. or LLC where their entity is legally liable to avoid any personal liability. But either you personally or your entity you buy under is most definitely liable to the seller.

import · February 11, 2005, 7:57am

Re: BUYING ? SUBJECT TO? - Posted by Paul

Posted by Paul on February 11, 2005 at 08:57:43:

John:

Thanks for your response.

I am not advocating skirting your liability to make the payments, only that there appears to be additional documents that would limit that liability to just being foreclosed on by the original seller, if you do default. (In many subject to transactions, the seller was an inch away from foreclosure … and ruined credit … in any case).

I’d never seen either creating a ?Deed of Trust to Secure Assumption? together with an ?Assumption Warranty Deed? OR creating a wrap-around promissory note ever mentioned anywhere. Again, all these documents appear to do is restrict the seller to foreclosing on you if you don’t pay.

(I’m currently pulling my documents together and just want to ensure that I’m using the correct ones. From what I’ve read and speaking to different attorneys, there seem to be differing views on what you actually need).

Regards,
Paul