Wrap questions - Posted by srb(Tx)

Posted by Tim on July 13, 2007 at 17:49:08:

Is this a partial sale? If so, have the buyer escrow to you and you keep the policy with a side agreement between you and the buyer.I.E. how much they get in the event of a claim. Certainly make sure they understand the need for contents or renters insurance inorder to protect their belongings.

If it’s not a partial I’m not sure I understand the question.

Wrap questions - Posted by srb(Tx)

Posted by srb(Tx) on July 13, 2007 at 12:39:59:

I buy a property using conventional bank financing. I then sell it by owner financing it.

I require a sizeable down payment & decent credit; I hold the notes for 6 months and then sell them off to get my cash back & pay off the bank loan. So far so good.

Here is the kicker:

When I sell the note, the note buyer would want to make sure that the home buyer maintains insurance coverage on the home and also pays property taxes every year.

My original lender (the bank) would also require that I maintain insurance coverage & pay property taxes (maybe through an escrow account) during the duration of the loan.

My question is this:

  1. How do you handle property tax payment on a home when you have sold it on a wrap and make the buyer responsible for property tax payments?

  2. For the first 6 months, there will be 2 insurance policies on the same property - what happens in the event of a claim?

I have posed these questions before with no satisfactory responses.



Re: Wrap questions for Insurance & taxes - Posted by Michael Morrongiello

Posted by Michael Morrongiello on July 15, 2007 at 11:52:27:

When WRAPPING existing underlying debt where escrow impound accounts exist for the collection of funds for taxes and insurance you would charge the SAME amount that you are being charged.

In fact you may not need to carry (2) two insurance policies. You might simply add the purchasers names to your EXISTING insurance policy as “additional insured”.

As for the infamous DOS - due on sale claus which another post brought up. Yes it does exist and yes it “could” potentially be enforced although this RARELY if ever happens. Ultimately when you sell off your wrap around seller financed “paper” you would be able to pay off that underlying lender and thuse extinguish that debt at some future point in time.

Hope this helps clarify the issues with insurnace and taxes involving wraps.

Best to your success;
Michael Morrongiello
Author of The Unity of Real Estate & “Paper”


Paper Into Cash- the Convertible Currency - Creatible Marketable Notes

Re: Wrap questions - Posted by dave(wa)

Posted by dave(wa) on July 13, 2007 at 23:58:42:

How do you get around the due on sale clause?