Buying Sub2

15 Replies

When purchasing a vacant home with Subject To, how does getting the utilities turned back on work? Is it just a simple call to utility companies notifying them that you are the title holders now?

Also, are there any concerns to know should the original loan holder pass away?

Do you know how long utilities have been shut off?

Do you know condition of electrica/waterl and gas lines (if it has gas).

If meters have been removed already by utility companies you may not be able to just get them turned on with out inspections. inspections may require them to be up to current code.

Typically, just a call is needed to turn on utilities.

Make sure you have a POA and you should not have any issues if owner passes.

Power of Attorney

Thanks Rocky, I assume you get the POA from seller when signing the Sub2 contract?

IMO utilities will be one of the easiest things to get done in a sub2 deal. In my area the electric utility will put them in your name just by you asking no proof required. I assume the thinking is if you are wanting to pay for utilities then you must have a reason. The water utility wants to see either a HUD-1 or a signed lease if you're a tenant, so again not a difficult proposition.

As for the death of the borrower. That's something that could happen, and you should have everything planned for in a worst case scenario like that. Your authorization to release and POA will help with that. I haven't done a sub2 so I can't say what all you would need for sure. @Bill Gulley has mentioned several times about the importance of planning for that, and what you as the buyer need to do when you purchase to be ready for a situation like that.

And as always seek REI savy legal counsel that can help structure everything properly from the start so you aren't trying to correct things later that could/should have been handled earlier.

Your authority under a POA dies with the grantor of that authority, it may also go away under other events. It can be withdrawn at any time, a pretty useless document unless for a specific reason/purpose. I rarely used one, usually when some party was not available to act on their own. :)

Ok, so now begs the question, If the original borrow passes, (loan still in their name), what happens to loan? Do I, as the buyer, not worry about it since I am still responsible for making the pmts? In all likelihood, I will never hear of their passing but just want to be sure on this part of the equation.

@Bill Gulley you got me thinking. I have several "sub2" deals in rental portfolio and need to make sure this is covered.

I have used limited POA when mortgage company issues escrow refund checks. Mortgage companies will not issue checks to your name and in this instance all I do is provide limited POA to my bank and there are no issues with deposits.

Originally posted by @Rocky V. :
@Bill Gulley you got me thinking. I have several "sub2" deals in rental portfolio and need to make sure this is covered.

I have used limited POA when mortgage company issues escrow refund checks. Mortgage companies will not issue checks to your name and in this instance all I do is provide limited POA to my bank and there are no issues with deposits.

Specific use is fine. I'd suggest a specific POA to the deal, not a general matter but whatever they accept. :)

Originally posted by @Rocky V. :

@Bill Gulley you got me thinking. I have several "sub2" deals in rental portfolio and need to make sure this is covered.

I have used limited POA when mortgage company issues escrow refund checks. Mortgage companies will not issue checks to your name and in this instance all I do is provide limited POA to my bank and there are no issues with deposits.

Rocky, I started a thread recently asking what language others here on BP use in their POA in a sub2 transaction because I'm working on a sub2 deal now. There's equity and the owner is in foreclosure. My plan is to fix & flip.

So far the only response has been from Bill Gulley. I noticed he confirmed you should be using (and even advised you to use) a POA. In my thread he seems to have a completely different opinion and says to never use one! I've tried several times asking him why he advised to use a POA in your example, but his responses all seem to address lots of things other than the simple question.

Please help by telling me what your average sub2 POA says. In your opinion, when would you use a POA in a sub2 deal? When wouldn't you?

Thanks in advance.

@Tom Plyler  

go back to your thread with my response. I'm not advocating that a buyer use a POA, I was specific, I thought, about my mortgage company using a POA for deposits. A buyer should not use any POA. I see your confusion, hopefully this clears that up. :)

@Tom Plyler  

IMO you should always use a POA along with a Third Party Authorization. I sent you an email a couple days ago.

could i maybe get a peek at that specific poa too? Id like to have a draft to show to a rei lawyer

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