A wrap, as the name says, “wraps around” the existing mortgage. Example: I have a 100K note on a home I own at 6 percent. I can finance this house for somebody else with a mortgage at say 8.5 percent, while leaving the orginal mortgage in place. I keep the 2.5 point spread between the two mortgages. SO I can make some money here.
Re: Subject To or Land Contract? - Posted by Randy (SD)
Posted by Randy (SD) on June 24, 2005 at 10:26:20:
As Greg(NJ) indicated one advantage in a “subject to” is you get the deed, this provides much more control. Either method can be used and sometimes you have to tailor your offer according to your sellers comfort level, some sellers are simply not comfortable deeding you the property with your contract/promise to pay the underlying liens where they would agree to a land contract or contract for deed.
Another underutilized tool is a note and warranty deed, sometimes referred to as a “all inclusive deed of trust”. Particularly beneficial when the seller is wanting some of their equity and are willing to wait for their cash. Like a “subject to” the property is deeded to the new buyer (you) instead of agreeing to take over existing financing the parties create and record a note. It’s advantageous to have the note serviced by an independent servicing company, payments are made to an impartial third party who pays the underlying liens, taxes and or insurance if desired, even profit to the seller. One significant advantage to the note is it is in marketable security on the secondary market. Meaning your seller does not have to wait for you to cash him out, he can sell his note in whole or a partial, he can trade his note, post it as security (commonly referred to as substitution of collateral) basically anything you can do with cash you can do with a note. When people understand the flexibility of a note secured by real estate, if they’re willing to consider subject to or a CFD they are much more receptive to a note because they can convert it to cash usually with in a few weeks.
Any competent real estate attorney or escrow company can create and record the necessary documents, you can download a free PDF note document at efanniemae.com:
remember you get the true warranty deed once you have paid all of the money and fulfilled your obligations.
So you can sell to someone else on a c/d but to truly sell an actual deed, you will need the deed,
what if the seller dies, what if the seller goes to Japan, what if the seller refuses to sign
You can avoid some of these hassles with properly handled pre-excution and having it all done by escrow, upon fufilled obligations in theory you would get the warranty deed at that point.
In my state it is a Contract for Deed
and if you get behind on your payments they can initiate to cancel the agreement as the seller and you can be out once initiated within 60 days.
with the actual deed you still own the house
You shouldn’t do either if you think you could possibly get 60 days behind though.
I can write up contract for deeds every day of the week, I am not yet proficient at subject to, I just haven’t really tried it, O work with semi-motivated sellers a lot, not too many super desperate sellers, but from those I’ve talked to subject to is typically a much more motivated seller that would to that.
Another thing to consider is if you put your hard earned money into the deal to reinstate the loan and catch up the amount in arrears, you now have your hard money into the deal and if that is the case, would you want a subject to or land contract?
Posted by aspd forum on January 10, 2006 at 19:05:43:
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The only difference is that the term ?wrap around mortgage? is usually used when the seller is taking back a junior-position purchase money mortgage while the term ?all-inclusive deed of trust? is usually used when an existing lender is the one that is making the payments on the underlying loan. A lot depends upon local usage convention. There isn?t any actual difference in the way that it works.