Contract section question... 4 posts by 3 users

Posted: 03/14/2008 at 06:57PM

I have a question about a section in my purchase and sales agreetment I plan on using.

It reads the following...

EXISTING MORTGAGE (s): Existing financing on subject property will be current in all payments of principal, interest, late charges and escrow amounts required by the mortgagee. Escrow balance has been calculated into the price and will transfer to the Buyer along with the title. Buyer will take title subject to his debt.

Does this mean that if the seller has a mortgage, the selling price is to cover, at the very minimum, the payoff value of the house (including principal, interest, late charges), plus any " escrow" amounts the seller wants?

Or does it mean that before close, the seller has to be current on all payments of the house including principal, interest, and late charges? Because if thats what means, then...isnt it impossible then to sell a house that you are in (pre)foreclosure on because being in (pre)foreclosure basically means you are behind on payments and the reason you are selling it is to avoid actually taking the hit of the house being taken away.

I dont know, maybe I'm just an idiot, but the wording of that section just came off weird to me.

Posted: 03/15/2008 at 01:19PM

Now, I am not an attorney and all contracts should be run through an attorney first. Just remember $300 spent now will save you thousands later.

However, to me the key is the last sentence where it means take title subject to the debt. Remember there are two documents. 1 is a title, and the other is the debt or mortgage which is a lien against that title.

So you will take title and leave the existing debt in place. Therefore you will be making payments on the mortgage, this is known as Subject To.

This is why you need to get out and educate yourself. Get out to real clubs, network with people. I love Bigger Pockets and it is a great resource, but it only goes so far.