Posted by js-Indianapolis on February 03, 2003 at 08:08:27:
In Indiana, a CFD would require a foreclosure, as opposed to an eviction for L/O. I know many people here who L/O, none who sell CFD. However, I’ve been told in other states, this is not the case. Perhaps you might ask some local investors, and check your state’s statutes concerning both.
S2 Deals - Question to David Finkel/Anyone - Posted by Scott in San Antonio
Posted by Scott in San Antonio on February 02, 2003 at 08:32:15:
David, in your article regarding L/O and S2, you wrote “When you buy a property subject to the existing financing, you have the seller deed the property to you and you take over making the payments. You own the property; you are on the deed. You are NOT paying off the seller’s existing loan(s), nor are you formally assuming this debt. Rather, you are taking title subject to this debt.” You also ask if you are allowed to do this and the answer is yes, provided you intelligently lower your risk."
I’m confused… “you say you are NOT paying off the seller’s existing loan.” It seems to me you are, at least until your tenant-buyer can qualify for a new loan and payoff the underlying mortgage. Can you explain.
Ultimately, I’m looking for an article written by an attorney who advocates this S2 process. My attorney and several REIA associates are starting to think that this process is illegal. I explain to the contrary, but if I had something definitive from a legal source I could share this with my group. Thanks for any insight.
Scott
Re: S2 Deals - Question to David Finkel/Anyone - Posted by $Cash$ (NV)
Posted by $Cash$ (NV) on February 02, 2003 at 10:25:34:
Scott,
Glad to meet you.
I would say what was meant by “you say you are NOT paying off the seller’s existing loan.” is that your buyer is paying off the loan. The existing loan must be taken care of either by you before you sell if you have any holding time or your buyer after it is sold. However I do not know Mr. Finkel, so these are only my thoughts.
You are morally and ethically responsible to make sure your sellers loan payment are made.
I would question your Attorneys thinking, when you are looking for professionals look to the ones who specialize in their field. You need to talk with a REI Attorney who understands this method of investing, because I can assure you it is a legal method of investing.
My sister-in-law is a Realtor in Florida, when I explained how I was investing, she replied ‘that is illegal’, I asked to see the State Statutes where it is not legal to do in Florida, this was 6 years ago I am still waiting.
Scott, I am aquainted with several investors in Texas, who do Subject To investing, the Sub2 Jail in Texas is empty and is being used for morning coffee cluthes by those that think it is illegal, because thats all they will ever do in life.
John $Cash$ Locke
Re: S2 Deals - Question to David Finkel/Anyone - Posted by John (Rome)
Posted by John (Rome) on February 02, 2003 at 09:46:33:
http://www.legalwiz.com/dueonsale.htm
this should help…on top of this…try asking John “Cash” Locke…his sub2 contract was given the once over by the JAG - and found it to be perfectly ok…(last I heard they don’t pussy foot around illegal stuff)…incidentally…apart from all the others - Bronchick France etc $Cash$ alone has done over 500 of these…
Cheers…
J.
Re: S2 Deals - Question to David Finkel/Anyone - Posted by Bill - Texas
Posted by Bill - Texas on February 02, 2003 at 18:56:38:
I’ve been studying S2’s and you’ve raised an issue I hadn’t considered. How do you know/verify that the seller is still making his mortgage payments? What are the implications of the seller getting behind or foreclosed on for non payment? Do you and your L/O tenet risk losing the property?
Re: S2 Deals - Question to David Finkel/Anyone - Posted by Scott in San Antonio
Posted by Scott in San Antonio on February 02, 2003 at 12:16:02:
Good resource. Thank you.
Re: S2 Deals - Question to David Finkel/Anyone - Posted by $Cash$ (NV)
Posted by $Cash$ (NV) on February 02, 2003 at 19:53:53:
Bill - Texas,
Glad to meet you.
I recommend using a Licensed and Bonded Loan Servicing Company. These company’s collect payments from your buyer and make the payments to your sellers mortgage company. Never let the seller make the payments!
They also send statements at the end of the year to your buyers for income tax purposes, this is of great help unless you like accounting work. Tell your sellers when doing a deal, that a third party collects the money and makes the payments. Also set up a Trust Account whereby if the buyer does not make the payment on time, then the payment is made from the trust account. This is a great way to build credibility with your sellers, you will find if makes perfect sense to them.
I do not use the L/O method to sell, I get a large percentage down, sell on Contract for Deed, then I take a percentage from the money down to fund the trust account on property.
John $Cash$ Locke
Re: S2 Deals - Question to David Finkel/Anyone - Posted by Tom (WA)
Posted by Tom (WA) on February 02, 2003 at 19:36:59:
Bill, These “subject to” transactions can and do work very well but they must be done correctly. It sounds like you are not ready to tackle one before doing a lot more studying. Take one of the courses offered here, they are good. It make no sense going on the hook for $100,000 (or whatever your market requires) without knowing what you are doing. But, to answer your question, you don’t give the payment to the seller and wonder if he makes it to the lender. You make it directly to the lender yourself. Happy investing.
Re: S2 Deals - Question to David Finkel/Anyone - Posted by Scott in San Antonio
Posted by Scott in San Antonio on February 03, 2003 at 06:42:07:
John, I see that you don’t use the L/O to sell. My associate in Austin uses both tactics… L/O if the Tenant-Buyer has around 5% for the downpayment (nr option consideration). If he gets 10%, he gives up the deed to his buyer. This is different from your technique in that he gives up the deed… you do the contract for deed (give up the deed once the mortgage is paid). Why do you do a contract for deed?
Scott
Re: S2 Deals - Question to David Finkel/Anyone - Posted by $Cash$ (NV)
Posted by $Cash$ (NV) on February 03, 2003 at 09:48:21:
Scott,
I only do a Contract for Deed when selling not buying.
I do not give up the Deed to the Buyer, the Deed stays in escrow at the Loan Servicing Company until the Buyer fulfills the terms of their Contract with me.
When my Buyer re-finances, usually two years, the Deed is then tranferred. It makes it easier for me to get the property back should the Buyer default on paymnents.
As you have demonstrated you get more money down on a Contract for Deed than on an L/O. The Buyer who puts more money down is more likely to re-finance the property than someone who leases the property.
John $Cash$ Locke