Working around a 'Due on Sale' clause in a Contract for Deed

[Kent Hranicka]

Good Afternoon,

I'm hoping I can pick some of your intelligent brains on an issue surrounding a Contract for Deed I am currently negotiating.     The owner of the property currently has a 1st and 2nd mortgage, and I will just be doing a wrap-around (I pay him,  he pays the bank).  However, the primary mortgage has a 'due on sale' clause and I don't really want to get stuck in a  situation where the bank calls the loan.    Additionally,  It might be a bit unethical to keep the bank in the dark on this matter. 

My thought is that the only other option besides hoping the bank doesn't care,  is to talk with the bank about doing an mortgage assumption.  

Has anyone dealt with a similar situation in the past?  Is there any way to 'skirt around' the 'due on sale' clause?   Or put language in the purchase agreement that will protect myself as the buyer? 

Any creative options or thoughts are welcome!   Thanks in advance.

Kent

[Darren Eady]

Lenders want to be paid.  They typically do not care where the money comes from.  I would NEVER give my money to someone, hoping that they will make a payment to the bank - too risky!

If I were in your shoes, I would check the title of the property and be sure it is free of liens or encumbrances, then I would take title through deed, then and only then, I would collect the instructions on making payments to the lender directly.

I did one of these where I was able to negotiate the 2nd loan down to about 25% of the balance and paid them off and only had to refinance the first (when I wanted to) and still have this duplex years later.  It was one of my favorite deals and is still a huge money maker for me.