Retaining original owner on deed on a sub to deal
Atlanta, GA · Member since 2022 · 1 post · 0 votes
Hey friends!
I am attempting to structure a deal where I am added to a deed as a 50% owner. I would assume all aspects of management including finding renters, maintence, paying the mortgage, etc. The original owner of the home would retain his 50% equity and be completely hands off. We would keep his mortgage.
If the owner is still present on the deed (though my name would be added) would their be a concern for the due on sale clause to be called? Also, when adding my name to the title, is there a way to stipulate equity ownership? Thank you thank you for any insight from those who have experience w/ sub to!
Hey friends!
I am attempting to structure a deal where I am added to a deed as a 50% owner. I would assume all aspects of management including finding renters, maintence, paying the mortgage, etc. The original owner of the home would retain his 50% equity and be completely hands off. We would keep his mortgage.
If the owner is still present on the deed (though my name would be added) would their be a concern for the due on sale clause to be called? Also, when adding my name to the title, is there a way to stipulate equity ownership? Thank you thank you for any insight from those who have experience w/ sub to!
Going 50 / 50 on ownership is a bad idea. When the time comes that you are no longer on each other's "good guy" list, neither of you can cause the property to be sold or make other decsions. Make it 51 / 49 and avoid problems.
The escrow company can prepare the deed for you.
Here is how one Due on Sale clause reads. You have to look at the Deed of Trust for the loan in particular to find out what that one says. They can be different.
19. Transfer of the Property or a Beneficial Interest in Borrower. For purposes of this Section 19 only, “Interest in the Property” means any legal or beneficial interest in the Property, including, but not limited to, those beneficial interests transferred in a bond for deed, contract for deed, installment sales contract, or escrow agreement, the intent of which is the transfer of title by Borrower to a purchaser at a future date.
I've written about it at the link below
Hey @Russell Smith, if you didn't already handle this... most people who have changed entity names for the ownership of their property will tell you that the bank never called the due on sale clause. And the vast majority of banks don't. THey don't even have departments to figure this out. That being said, it is getting much more attractive for lenders to get out of low mortgage rate loans!
Hey friends!
I am attempting to structure a deal where I am added to a deed as a 50% owner. I would assume all aspects of management including finding renters, maintence, paying the mortgage, etc. The original owner of the home would retain his 50% equity and be completely hands off. We would keep his mortgage.
If the owner is still present on the deed (though my name would be added) would their be a concern for the due on sale clause to be called? Also, when adding my name to the title, is there a way to stipulate equity ownership? Thank you thank you for any insight from those who have experience w/ sub to!
Going 50 / 50 on ownership is a bad idea. When the time comes that you are no longer on each other's "good guy" list, neither of you can cause the property to be sold or make other decsions. Make it 51 / 49 and avoid problems.
The escrow company can prepare the deed for you.
Here is how one Due on Sale clause reads. You have to look at the Deed of Trust for the loan in particular to find out what that one says. They can be different.
19. Transfer of the Property or a Beneficial Interest in Borrower. For purposes of this Section 19 only, “Interest in the Property” means any legal or beneficial interest in the Property, including, but not limited to, those beneficial interests transferred in a bond for deed, contract for deed, installment sales contract, or escrow agreement, the intent of which is the transfer of title by Borrower to a purchaser at a future date.
I've written about it at the link below
Tagging on to @Account Closed's post, keep in mind that ownership is not the same as voting rights. 51/49 of voting rights in a corp or LLC is fine. A property owner holding 49% is still able to decline to sell (or refi, or anything else), which 100% kills a deal. If you want a democracy, form a company with governing docs outlining voting rights. You can designate equity disbursement terms in a JV agreement, but those don't appear in the deed records. If your buyer (or their lender) requires title insurance, as they should, then you won't be able to sell over the objection of a 49% stakeholder.
Tagging on to @Account Closed's post, keep in mind that ownership is not the same as voting rights. 51/49 of voting rights in a corp or LLC is fine. A property owner holding 49% is still able to decline to sell (or refi, or anything else), which 100% kills a deal. If you want a democracy, form a company with governing docs outlining voting rights. You can designate equity disbursement terms in a JV agreement, but those don't appear in the deed records. If your buyer (or their lender) requires title insurance, as they should, then you won't be able to sell over the objection of a 49% stakeholder.
I just reread your post.
My bad, My intention is that the property be held in an LLC with 51% ownership by one party, so the decison to have the LLC sell the property can be made. I would never suggest that someone split property ownership on a deed in their own names. If I did say that, I retract it.
(Previous repsonse - assumed using an LLC
Interesting point. But, wouldn't the 51% owner be able to sue the 49% owner for performance and likely win? Troublesome to be sure, one solution. Another is a last resort and that is to sell the 51% ownership to an investor.)
If a deed doesn't state that the grantees hold title as joint tenants with rights of survivorship, then I believe they hold as tenants in common. A deed can state that one grantee has a greater interest then the other (2/3-1/3) but that doesn't give the 2/3 holder any greater rights to the property, voting or otherwise, then the 1/3 holder. If one owner wants to sell and the other doesn't, a partition action can be filed and if the property cannot be equitably divided, the court can order it sold by private sale or to the highest bidder.