My question revolves around the legalality of Open Hold Titles. I recently was advised on an investment method that to me seemed semi illegal due to the clause in almost all mortgages, the banks or lenders, rights to "Dues on Sale". The part I was advised on and was unfamiliar with was the technical detail of having a homeowner acquire an Open Hold title for their poperty. They said if the home owner has or creates an Open Hold title then someone such as my self, an investor, can work with the homeowner to sell the house and take a portion of the revenue all while the deed belongs to them. This would be done using a third party escrow company to hold the title and while we either fixed or helped to catch the home owner up on payments before selling the house for them.
I honestly am just starting to get involved in BiggerPockets so I am clueless to the subject and the laws aren't the easiest to reaserch so I hoped for anyone she opionion on if this may illegal in someway pen ethically fround upon?
This sounds like a convoluded version of what an Open Title policy is supposed to be used for.
Traditionally, you can get an owners policy that is open. It is available at the time of purchase, and is intended for a quick turnaround to a new owner. Flippers can use this to save on expense for the new owner to eliminate the need for 2 policies within such a short period of time.
However, I don't know why you would use this during a distressed Seller's redemption period, AND I don't know how it would be useful to you as the investor if you are not the end purchaser.
Furthermore, I don't know how the lender would even be affected. They have the lender's policy for their protections, so the owner's policy is spearate.
It definnitely raises red flags, and I would ask more questions if I were you. It doesn't sound right.
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