Assuming a Bank Note

4 Replies

Hey guys, not new to real estate buy new to this world. Trying to start some personal projects and have a few relationships going with pre-foreclosures. One contact in particular is interested in me assuming the loan, granted I pay the back fees (which is minimal).

I hear quitclaim is not the way to go, so what are my other options? (Please note I live in Alaska). I do have access to investors and/or hard money if the bank calls the note due, and have enough money out of pocket to renovate and am confident I can resell within weeks of the finish rehab.

Is this a do-able thing or is my head in the clouds? Thanks in advance!

James Cash, Real Estate Agent in AK (#18690)
Originally posted by @James Cash :

Hey guys, not new to real estate buy new to this world. Trying to start some personal projects and have a few relationships going with pre-foreclosures. One contact in particular is interested in me assuming the loan, granted I pay the back fees (which is minimal).

I hear quitclaim is not the way to go, so what are my other options? (Please note I live in Alaska). I do have access to investors and/or hard money if the bank calls the note due, and have enough money out of pocket to renovate and am confident I can resell within weeks of the finish rehab.

Is this a do-able thing or is my head in the clouds? Thanks in advance!

Sure as long as the ARV justifies

Tactics, are you a licensed contractor or Realtor?

Look at the threads about Subject-To, while you agree to pay a seller's mortgage, you don't "assume" the loan with the bank.

What kind of loan is it, secondary market like a 30 year fixed rate or is it a portfolio loan at a local bank? Do you qualify to get a loan besides the down payment requirements?

Sometimes being straight up with the bank is a better way to go, make up the payments and offer to guarantee the note, not assume it formally.

Pre-foreclosures are dangerous waters, new federal laws about contacting and "helping" an owner after notice has been sent. Another issue, that property is on the lender's radar screen, doing a Sub-To will give you greater exposure to the due on sale clause.

I suggest you and the owner get with the lender and see what they will accept before you try any funny stuff. If notice has not been given and you are a contractor, you can do work on the place and your lien will most likely be superior to the bank loan as a workmen's lien. If your intent was to flip it, use a construction contract. That can also be some leverage to convince the lender to let you take it over and hold it too. Good luck :)

Thanks!

Any advice on looking up regulations on federal laws?

I am a licensed real estate agent, but do work with friends that are licensed contractors. 

It is a 30 yr fixed Conv. My intent was to take over the loan, and no I am not financeable right now. 

James Cash, Real Estate Agent in AK (#18690)

@James Cash Just so you know, "assuming a loan" is a specific legal term, actually making an application with the lender and they agree to put you on the loan, and take the previous owner off.  It's different from "taking over sub2" which is usually without the lender's knowledge.  If you're looking  to flip fairly quickly, probably not a big risk.  As Bill said, with a loan in default it's monitored more closely than a performing loan.

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