If you can’t pay the loan, and can’t find anyone else to buy your position and pay the loan, your seller has breeched a civil agreement. Absent fraud, there are no criminal penalties. When the bank calls the loan, which is their right under the mortgage agreement, and the loan is not retired, they will foreclose on the seller and take title to the property. The original seller, and the person that you gave a L/O to will then sue you. If you buy at a price that is well-below FMV, assisting your buyer with a quick re-fi will bail you out of trouble. Maybe no profit, but no lawsuits, either. It?s a calculated risk. I personally believe the odds can be improved with a PACTrust, but there is some risk, nevertheless.
What happens when the bank does enforce the due on sale clause, If you were in the midlle of a l/o deal. something longer than 3 years. What happens. I know some people like to answer they never find out and if the did they never enforce it, but what if.
Thanks
You might want to refer to the “How-to Articles” on the site on “Buying Houses ‘Subject To’” by Charlie France. She explains why it is in the bank’s interest to not enforce the due on sale clause, simply because more often than not, the banks or the mortgage companies are not in the business of selling real estate, they’re in the business of making loans out.
You may be forced to refinance or sell it quick to get the loan payed off. Always have an exit strategy in case this “worst case scenario” ever did come up. Probably 99% chance it won’t but always be ready in case it does.
But what if you didn’t have the money to start off and that why you were doing a lease option. At that point I can assume I’m pretty much screwed, just curious about all the little nasty possibilties.