Posted by John Merchant on November 04, 2008 at 11:38:16:
If you assume a bank loan, you make an application to that bank to become its approved borrower, then sign its note for the balance you’re agreeing to pay.
In such an “assumption” the original borrower doesn’t get a release and he’s still on that note until it’s paid in full.
In a “subject to”, in contrast, you, the buyer make NO agreement with the bank but agree with the seller (the borrower on the bank note) that you’ll make and cover his debt to the bank so he won’t go into default on his bank loan.
In the sub-to, that borrower is still on the note and the bank doesn’t even get a formal notice he’s sold it or that you have anything to do with the RE.
Looks like you’re making an assumption that somehow, in both a sub-to deal and an assumption of the bank’s loan, the seller is getting a release. NOT SO and he’s still on the bank note.
It wouldn’t matter what kind of deed he might have given the buyer. So long as that buyer didn’t refi it, and have the Seller pay off his bank, that Seller is still on that bank’s loan.
If YOU made Tom Jones a loan, would you want him to get an automatic release from his debt to you if he sold it to Bill Smith? Obviously not, and you’d expect Tom Jones to still owe you, which the law says is the way it is.
Are there any legal procedures or tools–or advice suggesting an alternate approach–for the following situation:
About 10 years ago, someone purchases a house sight-unseen from an investor. Turns out the property was damaged. Purchaser contacts the investor and says he doesn’t want the property. They meet at a bank and the investor buys the property back. Apparently.
However, the new deed never is recorded; the house remains in the purchaser’s name. Purchaser thinks/assumes house is the responsibility of the investor. Payments aren’t made. Taxes aren’t paid. House goes into further disrepair.
The purchasers/sellers misplace the paperwork saying they sold the property back to the investor. The transaction was conducted by a bank that’s gone out of business, and that paperwork is missing. And the successor bank won’t foreclose on the property in order to acquire it. Nor does it seem willing to accept a deed in lieu of foreclosure.
So the property sits. Credit of the purchaser/seller is being injured by non-payment of mortgage and taxes.
Unknowns: Whether the land itself is worth selling. If the purchaser/seller still “owns” the property, per the last recorded deed, then they presumably could sell it. That’s being looked into.
Question: Is there anything that someone who denies ownership in property can do to legally establish lack of ownership in a situation like this?
When the investor took back the property, did not the mortgagor also require that the investor assume the mortgage, subject to?
I do not find it credible that someone would take out a mortgage and if they wanted out, that they not make sure that they were no longer responsible for it. A quit claim deed can transfer an interest in property but you need other paperwork to do a subject to mortgage transfer.
If the investor took back the property, why did he not also take the financing? I’m interpreting this to mean that the investor got paid, then got the asset back but he still kept the payment. This is undo enrichment. A deposition might clear this up.
When the investor took back the property, did not the mortgagor also require that the investor assume the mortgage, subject to?
I do not find it credible that someone would take out a mortgage and if they wanted out, that they not make sure that they were no longer responsible for it. A quit claim deed can transfer an interest in property but you need other paperwork to do a subject to mortgage transfer.
If the investor took back the property, why did he not also take the financing? This means that the investor got paid, then got the asset back but he still kept the payment. This is undo enrichment. A deposition might clear this up.
When the investor took back the property, did not the mortgagor also require that the investor assume the mortgage, subject to?
I do not find it credible that someone would take out a mortgage and if they wanted out, that they not make sure that they were no longer responsible for it. A quit claim deed can transfer an interest in property but you need other paperwork to do a subject to transfer.
If the investor took back the property, why did he not also take the financing? This means that the investor got paid, then got the asset back but he still kept the payment. This is undo enrichment. A deposition might clear this up.
Posted by Bill H on September 01, 2008 at 18:52:18:
Do you have proof that you deeded the property to the investor? As Natalie said…the deed does not have to be recorded to be valid…it only has to be dleivered.
If in fact you had it notarized and physically give or had it given to the investor and can prove this you should be in the clear.
Please do not take this as legal advice…see a competent attorney for legal advice in this matter.