"subject to" buying options

4 Replies

I am looking at potential liability of the following subject to deal.    Scenario...  seller went into strategic default on primary years ago.. he has been prolonging foreclosure via fraud claims against the bank.. all the while I am sure renting and paying nothing against the property.  He suggests he may have a good case however the bank also may move on him at any.  He is looking to cut a deal.. I believe in his mind something like this:   He transfers the property to me subject to mortgage with no expectation for me to pay his mortgage since it is being actively contested.  If he is successful in winning the case and getting the loan forgiven(days or years from now), I give him x percent of the proceeds on the future sale of the property.   If he is unsuccessful and the property moves to auction we are both out.   

I cannot think why a seller would want to do this?    Does anyone know if him moving the property to another entity (in any way) would give him potentially more leverage in obtaining a settlement or a modification from the bank?    He has indicated he has no concern on having a foreclosure on his credit.    Thoughts?

How could a deal be structured with someone that cares little about their credit yet wants a piece of action on the sale of their property?  

It feels bad to wast time if his fraud claim falls through.  Would it be viable to do this deal in away that keeps the bank happy and paid?

In the past, some district attorneys have took an interest in bring fraud claims against subject too buyers who don't pay on the mortgage.    You may want to insist that the mortgage be paid up. 
Other options could be a short sale.  The bank may welcome that to avoid this long legal battle. 

Thanks. Short sale would be a fantastic approach however I am under the impression that most banks require any property approved for short sale to hit the MLS for a period of time prior to accepting any offers.

Unless of course the fact that this individual is pursuing legal action incentivizes them to bypass that to accept an offer and move on.     Does anyone have experience and success submitting a short offer to a bank in this type of scenario?     

Originally posted by @John Grover :

Thanks. Short sale would be a fantastic approach however I am under the impression that most banks require any property approved for short sale to hit the MLS for a period of time prior to accepting any offers.

Unless of course the fact that this individual is pursuing legal action incentivizes them to bypass that to accept an offer and move on.     Does anyone have experience and success submitting a short offer to a bank in this type of scenario?     

that is a valid impression...that is has to hit the MLS before being considered.

If there is actual "legal" action, it's public record and you can confirm it. I get calls all day that some borrower is threatening legal action against me as the lender because god forbid I enforce their contractual obligation to pay. I've had three actual "Legal actions" in 25 years. Two of them were credit reporting related (to their loan performance) and we gave them money to go away as a cost of doing business and the third, they lost. Sellers follow the same path of those facing death...anger, denial, negotiation, acceptance, etc.. Logic typically goes out the window and emotions take over in most cases.

I’m confused.

Seller promised to pay lender, intentionally chose not to, and now accusing them of fraud In hopes they’ll get the bank to give them the house for free?

Also, Seller may want to move property into another entity, then notify the bank because he’s expecting them to then relinquish the property free and clear instead of citing the due on sale clause? I just don’t follow this. What am I missing?

what is your role here?
Are you trying to flip it or..what?

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