Creative financing / Unlimitted Funding

3 Replies

Good Afternoon all,

This morning , I was watchin a webinar about "Subject to "  and Lease options.  In other words, Taking over someone's existing mortgage and your name is now on the deed but not the bank note.

Are these legal processes. ?

Can you be penalized by law in any of these situations? 

Also there is a " Due on Sale" Clause ,  If I am reading this correctly, the bank can call the note if they chose, when the deed has a different name on it than originally signed........   Does this actually happen ?

Where can I look to find Contracts and forms for these purposes, that are legal in the state of Arizona

Please Advise,

Dennis

@Dennis Dougherty

Most banks probably won't exercise the "Due on Sale" clause as long as payments continue coming in.  That being said if you are looking at investing in a property I recommend if you're going to do an owner financing deal that the seller owns free and clear.

If you are going to pursue properties where there is a current mortgage, I'd recommend AT MINIMUM having the cash needed to pay for the balance of the mortgage if mortgage holder calls the note.  Is it really worth not only risking the sellers credit but also how much money you've put into the property because the bank decides to call the note? 

This is my personal opinion and I am in no way responsible for what you decide to do.  Others on Bigger Pockets who have done a "subject to" deal as I have never done one will probably have more in depth information.

@Dennis Dougherty I own several rental properties "subject to" the seller's mortgage. Some I have owned for a short period of time and others for a couple of years. No banks have called the loans due, and I hope it stays that way. It is always in the back of my mind though. If a bank does call one of the loans due, I do have some lenders I can go to (private and banks) to pay off the note. And I have enough equity to potentially sell it if I had to go that route (not preferred but I would do it if it was last option).

I think a very important aspect of doing a deal like this is knowing that someone else's credit is on the line (seller). I consider it my duty to protect that. 1) its the right thing to do. 2) my credibility is also on the line. 3) if I do right by the seller (pay off their note, save their credit), they are likely to refer me to more people.

As for contracts, I would find some local investors who do subject to in your area/state, and find out which lawyers they use to close.

As for legality, again contact a lawyer. 

And of course the disclaimer... I am not a lawyer, or an accountant. This all just based on my experience and my opinion.

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