Subject-to vs just having the deed signed over

11 Replies

I have a seller with multiple properties he wants me to just take over payments on. I contacted an attorney and was told there is no such thing as 'subject-to' in that state and I would have to do a land contract. My question is: If this guy is willing to sign his property over to me via a deed, couldn't I just have him deed it to me and I stsrt making his payments to the lender? I know it risks having the contract called in but even then attorney said that would be rare as long as payments are being made. So why go thru the hassle and expense of doing a land contract vs just having the seller sign the deed over to me?

I'd want some some more information about why the attorney says there is no such thing as subject in that state. Buying property subject to existing mortgages is done everywhere, so I'd want to know what he is talking about and what his concerns are. I would not do a land contract nor contract for deed. I would never leave the deed in the seller's name. But that's me. I don't buy without a deed.

Time to speak with an attorney that's knowledgable in that area. If the property has a mortgage you don't want to deed it directly to you or an LLC, instead you can put it in a land trust.

If the seller signs the deed over to you just remember if there is a mortgage the seller is still on the hook for the payments and yes the lender can call the loan due. How are you protected if the wind blew the shack away?


Joe Gore

K Marie Poe...The "subject-to" would be silent...not an assumption of the exsisiting loan but I still couldn't get the attorney to clarify why the state does not allow them. I find that hard to believe and I will be talking to anither attorney soon but wanted to get some feedback from here also. I am currently getting ready to close on a land contract deal but it is a very low dollar property and the rents I receive during the payment period will be 3 times the amount I am paying for the property and a few repairs. That property is owned free and clear by the sellers. Also, the deed is being drawn to be held by title until payments are paid in full. Even if the sellers didn't uphold their end of the deal and give me the deed after I made the payments (unlikely) I would still have made several thousand dollars profit in the meantime.

Joe Gore - Guess I wouldnt be protected if the wind blew it away since the insurance is impounded into the sellers loan and therefore in his name. As for the loan being called in..these are low value homes with small mortages...if I HAD to I could pay off the loan...and get insurance in my name.

And thanks Mike Nelson....I am going to further explore land trusts.

you definitely need a real estate attorney.

As for if the wind blew question I sure hope that was more a how are you protecting both yourself and the person of which the mortgage is held by.

Personally I would never enter a land contract or wrap. Doing so can cause intentional delays by the seller on your sale.

Originally posted by @Sheri Uveges:
K Marie Poe...The "subject-to" would be silent...not an assumption of the exsisiting loan but I still couldn't get the attorney to clarify why the state does not allow them. I find that hard to believe and I will be talking to anither attorney soon but wanted to get some feedback from here also. I am currently getting ready to close on a land contract deal but it is a very low dollar property and the rents I receive during the payment period will be 3 times the amount I am paying for the property and a few repairs. That property is owned free and clear by the sellers. Also, the deed is being drawn to be held by title until payments are paid in full. Even if the sellers didn't uphold their end of the deal and give me the deed after I made the payments (unlikely) I would still have made several thousand dollars profit in the meantime.
Joe Gore - Guess I wouldnt be protected if the wind blew it away since the insurance is impounded into the sellers loan and therefore in his name. As for the loan being called in..these are low value homes with small mortages...if I HAD to I could pay off the loan...and get insurance in my name.

And thanks Mike Nelson....I am going to further explore land trusts.

I understand how it's silent and that it's not an assumption. I love sub2. What I don't understand is the attorney saying sub2 is not done in a particular state. The attorney may be referring to concerns about creating a mortgage agreement with the seller. If you get a deed and take over payments, there's no "security instrument" for the seller, unless you wrap it with another mortgage or CFD. If it were me, I'm OK with getting the deed and executing a purchase agreement that spells out taking over the existing mortgage. Hopefully the attorney can explain why he object to that plan.

You won't be getting a deed if you're taking over a CFD agreement your seller made when he bought the property. Make sure your seller has the deed and that you are taking over mortgage payments. Unless you're ok with a CFD wrap. :)

Original post:
I understand how it's silent and that it's not an assumption. I love sub2. What I don't understand is the attorney saying sub2 is not done in a particular state. The attorney may be referring to concerns about creating a mortgage agreement with the seller. If you get a deed and take over payments, there's no "security instrument" for the seller, unless you wrap it with another mortgage or CFD.

K Marie Poe...I figured you understood but was just trying to clarify. I don't know why the attorney is telling me they can't be done in that state. My plan was to get the deed and have a signed purchase contract as you stated. He has traditional mortgages on the properties, not CFD. This attorney also told me I couldn't execute a purchase contract myself unless I wanted to get in trouble doing real estate without a license and stood his ground even after I said "Even as a principle to the transaction"? He said "Nope, not unless you want to get in trouble" I have never heard of that ANYWHERE. Funny thing is the first two homes I bought out there were cash sales and the seller wrote up the purchase contract after we verbally agreed to terms, then we had an attorney draw up the deed and do the title work...all with no problems. I will be talking to a different attorney this week. Thanks for all your input on this.

Originally posted by @Sheri Uveges:
Original post: I understand how it's silent and that it's not an assumption. I love sub2. What I don't understand is the attorney saying sub2 is not done in a particular state. The attorney may be referring to concerns about creating a mortgage agreement with the seller. If you get a deed and take over payments, there's no "security instrument" for the seller, unless you wrap it with another mortgage or CFD.
K Marie Poe...I figured you understood but was just trying to clarify. I don't know why the attorney is telling me they can't be done in that state. My plan was to get the deed and have a signed purchase contract as you stated. He has traditional mortgages on the properties, not CFD. This attorney also told me I couldn't execute a purchase contract myself unless I wanted to get in trouble doing real estate without a license and stood his ground even after I said "Even as a principle to the transaction"? He said "Nope, not unless you want to get in trouble" I have never heard of that ANYWHERE. Funny thing is the first two homes I bought out there were cash sales and the seller wrote up the purchase contract after we verbally agreed to terms, then we had an attorney draw up the deed and do the title work...all with no problems. I will be talking to a different attorney this week. Thanks for all your input on this.

Definitely time for a new attorney, or at least a second opinion. The attorney should be explaining his concerns in a clear way. If they are legit he should be able, in layman's terms, to cite codes or case law to support his ideas. Just saying do what I say unless you want to get into trouble is fear mongering and doesn't garner trust. I wouldn't give $400/hr to anybody who talked to me like that.

How attached are you to this opportunity?

Investor rule #1 - The guy (or gal) with the gold makes the rules

Investor rule #2 - The guy (or gal) who wants it least wins.

Too many people forget these when trying to acquire a property (or anything else, for that matter).

Since you don't tell us what state this property is located, nor does the attorney cite any code, I will presume that he is merely talking with a bias toward the seller's interests and not really providing you anything useful.

There are ways to mitigate a seller who remains obligated on a secured debt. If your subject property is located in a state with recourse mortgages, this may be the issue that the other parties are concerned with.

I see the OP is in California. Probably wouldn't be having these issues here. If it were me, I'd just get another attorney (closing agent?) or move on.

Some will, some won't, some do, some don't; next, next, next.

@ Rick Harmon... I'm not attached to the deal. In fact I'm probably going to let it go because I'm only interested in half the properties he wants to sell me and as of now he is sticking to wanting to get rid of them all.

The properties and attorney are in Ohio and I'm in California. I have no trust for this attorney and will not ever be using him on any deal because of the 'fear' aspect he seems to be taking and what I consider to be a lack of professionalism in being unable or unwilling to explain the 'why's' of what he is telling me. I am going to contact another attorney and get his opinion.

I am trying to learn as much as possiblr about everything real estate in Ohio just for future reference even if this deal never happens.

I had a couple of attorneys tell me sub to was illegal, and one even told me that any type of assignment was illegal because I was a "straw buyer". Moral of the story is, just because they're an attorney, doesn't mean they are skilled enough to give you advice. I recommend going to your local REIA and finding an attorney through them.

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