Help in first transaction - Posted by Sergio

Posted by Brad (Ky) on April 11, 2003 at 21:20:15:

What happens when they don’t pay again? Well, the process starts over I would think. I haven’t had this happen before, and I really wouldn’t want to put myself in a position to allow it to happen. I don’t really know the answer to that.

As for the second question, I can’t really personally attest to how often, because I am not that seasoned of an investor when it comes to that type of transaction. BUT…here is something that was posted to the board just last week that you may find interesting.


We’ve been through this issue AD-NASEUM, but I’ll do it again one more time
for those who are new here.

Buying a property subject-to the existing mortgage means the seller deeds
you the property without paying off the existing mortgage loan and without
you formally assuming the obligation with the lender’s permission. Yes, the
mortgage instrument may contain a provision permitting the lender to
accelerate the loan, i.e., “call it due.” Whether or not this may happen is
forever a topic of discussion here, so I won’t go into it. Robert Bruss, a
highly respected real estate attorney and syndicated columnist thinks the
risk is slim to none:

Read here:

Attorney Jeffrey Liss, a Harvard Law School Graduate and well-respected
member of the Illinois Bar, wrote an excellent article called “Drafting
Around the Mortgage ‘Due on Sale’ Clause in the Installment Sale of Real
Estate” that was published in the Chicago Bar Record. In this article he
points out that “the mortgage does not prohibit the [transfer], but merely
gives the mortgagee an option to accelerate. There is no duty upon the
seller/mortgagor to report such a sale.”

Attorney Robert Bruss, whose syndicated articles appear weekly in every
major newspaper around the Country, advocates the practice transferring
properties “subject-to” existing loans without notifying the lender.

And, remember Porter, the Ohio investor that was sued by a number of sellers
after she took dozens of properties “subject-to” and didn’t make the
payments? Well, despite all of the negative newspaper articles, the county
prosecutor declined to file criminal charges against her:

“Investigation of Porter’s arrangements showed any irregularities appear to
be far more civil than criminal. It looks like the parties knew what they
were getting into, and there was no evidence of false or doctored documents
created by Porter through her various businesses.”

Read here:

So, folks, if there ever were a chance for someone to go to “due on sale
jail,” this would have been it! Fore more reading on the due on sale, read
my article here:

That should shed some light for you. Looks like a great post and very due diligence put in on that one.


Help in first transaction - Posted by Sergio

Posted by Sergio on April 09, 2003 at 09:40:18:

This is the deal. House worth ~150k, payoff balance of 125k (includes accrued interest, legal fees and other fees). The house is in the early stages of foreclosure. Owners want to avoid foreclosure. They also want to stay in the house for a year and then they are out. I offered them to put the 10K needed to put the mortgage up to speed and in exchange they will deed the title. They’ve agreed. What happens with the sale on due clause? The collection company is telling me that I can’t do it. They are telling me that I can buy the note from them? Do mortgage companies give you money to buy the note?

Any help is welcome. Thanks in advance


Re: Help in first transaction - Posted by Brad (ky)

Posted by Brad (ky) on April 09, 2003 at 14:56:19:

Go to the bank with your seller. Give him ten thousand dollars. Haven him make a cashiers check on the spot to the collection company. Take the cashiers check and mail it. Get the property deeded to you.
That’s just what I would do.

Hates it when people say “you can’t do that”,


Flip the note - Posted by Chris_CA

Posted by Chris_CA on April 09, 2003 at 11:06:16:


If they’re willing to discount the note substantially, you could get the note under contract at a discount and then flip it to another investor for some quick cash. Just another option.

Re: Help in first transaction - Posted by Sergio

Posted by Sergio on April 11, 2003 at 13:46:19:

Thanks Brad. How often do you think that banks in general execute the sale on due clause? What happens if the seller doesn’t pay the montly payment again?