BiggerPockets

Joseph, if your sister doesn't feel comfortable selling sub2 to this guy then give me a call LOL!!!

I know, it's a shameless plug but really. She has to be ok with giving ownership, the quitclaim means nothing. The actual OWNERSHIP will be transferred simply b/c it is an actual SALE of the home. Quitclaims aren't transferred when you buy a house the traditional way and it's certainly no different here other than the existing mortgage stays in place, that's all.

If she's not comfortable with that then have her sell it Lease/Option, Contract for deed or whatever...........

I never put up payments in advance but will always offer to include in the P/S contract that I will deed the property back to the mortgagee if I fall more than 30 days late on the mortgage.

this way, the seller knows that I'm in it for the money and if I don't perform they can have the house back. Guess how many times I've had to do that?......NONE

anyways, hope that helps ,feel free to hit me up. I know a thing or two about a thing or two when it comes to Subs

Oh, and for the record, she's very ok with giving ownership. She wants that sucker gone. It's the fact that she is still ultimately responsible for the mortgage that is making everone nervous.

If you want to try that, don't use a quit claim. Use a warranty deed to give the ownership back from the investor to her.

There are several other ways to do a deal like this besides sub 2. Sub 2 works with a DESPERATE seller who wants the property GONE in the worst way. If she's worried about being stuck holding the bag on a a mortgage for a house she no longer owns, she's not really that desperate. Honestly, I don't blame her. I wouldn't sell on sub 2, and I think most investors would not.

A better alternative for her is a wrap. She creates a new mortgage and sells it to this investor with the new mortgage. He pays her, she pays her old mortgage. Or, use an escrow service. The wrap terms can mirror her existing loan. She gets a security interest (deed of trust or mortgage) from the investor. That gives her recourse if he doesn't pay.

A land contract is another alternatives. She retains ownership, he makes payments and gets possession. When he completes the contract, he gets ownership.

Lease/option is another alternative. This would really be best for here, since she gives up very little control.

At this point in life I'd rather avoid forgetting anything :-).

Here's a quick summary of her options if he defaults, from a non-lawyer. This time they're in order from options that give her the strongest position to weakest.

Lease/option - she evicts under the lease. She keeps any option money (probably zero, since there's no equity.)

Land Contract - varies somewhat. May require a lawsuit to void the contract.

Wrap - foreclosure. She's sold the house and is a creditor, and would foreclose based on her security interest.

Subject to - lawsuit against the seller. She really has very limited options to get the property back. Most likely is that the lender will foreclose and take the house.

Jon spelled choices out nicely.

One other concept that is not mentioned is a hybrid of a lease w option and a contract for deed.

And a lawyer came up with this. :)

Give the tenant:
A 36 month lease
A Contract for Option to purchase

The "contract for option" states and restates that an option will be delivered in the future, after the specific performance on the lease and that no right title or interest is passed at the execution of the contract.

This concept can be used with any lease, on any kind of property, of any value.

This avoids "equitable interest" claims from the tenant.

In a CFO or Contract for option to purchase, there is only a landlord and a tenant, not a "tenant buyer".

Brian

Sorry dbl post