Rental Property Investor · Dayton, OH · Member since 2018 · 109 posts · 48 votes
Hi all,
Talking with a seller tomorrow about buying a duplex from him Sub To. And I'm probably an idiot but I can't seem to figure out what exactly happens when I take over the payments. Am I sending his mortgage company checks with my name on them? A little confused... Thanks much.
Talking with a seller tomorrow about buying a duplex from him Sub To. And I'm probably an idiot but I can't seem to figure out what exactly happens when I take over the payments. Am I sending his mortgage company checks with my name on them? A little confused... Thanks much.
-Ian
There is more to it than meets the eye. However, basically, if there is a mortgage you send a payment to a servicer who sends the payment to the lender and the servicer also sends notice to the seller that you made the payment. If there is no mortgage, you send the check directly to the seller.
Either way, make sure you use an attorney, have a purchase & sale agreement, open escrow, do a title report, have the seller sign disclosures, record the deed, put the insurance in your name, have reserves on hand, always, always, always make the full payment on time or face the possibility of a lawsuit, preferably take ownership in an LLC, and understand what the Due On Sale is and how to handle it. Sometimes I split these with students to keep them out of trouble. Subject To is a powerful tool but it's best to know what you are doing.
Talking with a seller tomorrow about buying a duplex from him Sub To. And I'm probably an idiot but I can't seem to figure out what exactly happens when I take over the payments. Am I sending his mortgage company checks with my name on them? A little confused... Thanks much.
-Ian
You don't need to overthink it. Pay his lender directly from your account. You can send checks, set up automatic checking account deductions, or have a loan servicer make the payments if it's a seller-financed deal.
Tip: His lender won't talk to you or share account information unless they have borrower authorization. Not only will you need a letter of authorization from the seller, but I also recommend adding a stipulation to the purchase and sale agreement that he will provide that authorization in perpetuity.