Has anyone closed a subject to deal in ny?

Question

Hi everyone!
We have a very motivated seller who reached out to us. They just purchased their home 6 months ago for 275. The currently owe 268. They want to sell their home because they lost their jobs are are moving out of state. If they were to list on the market they would have to go to closing with cash. We offered them to take payment subject to their existing loan. They are all in and ready to move forward. Once we take over payments we plan to do a rent to own contract with a tenant where they buy the property in 3 years. I hear a lot of hesitancy and push back on subject to deals from sellers attornies in NYS. Our plan is to have our attorney write up the contract and then have the seller use our attorney to close as well. Does anyone in NY have experience on successful subject to deals or any feed back?

Thank you!

Doug Gilmer · Answer

My understanding is it can be done in all 48 lower States. The biggest thing you have to worry about is the duo on sale clause as mentioned however if you wait to record the closing for a minimum of 30 days then it doesn't trigger it in most cases....  Also I heard Ashley Kaer from the bigger pockets real estate rookie show mentioned the other day that New York is not friendly to rent to own people. Check into that further, Because the way she made it sound if they want to back out of the deal you have to give them all of their money back!....  To learn more of the ends and outs of Sub 2 check out Pace Morby on YouTube

Jake Wiley · Answer

I think the hesitancy you will find relates to the due on sale clause in loan agreements.    Essentially if the seller sells the property, the loan is due per the note/mortgage, so it's somewhat difficult for an attorney to complete a contract that clearly conflicts with another legal agreement and creates a cloud on the title, especially an attorney representing the sellers.

The seller is the one taking the credit risk, but you would be put into a difficult scenario whereby if the note was called the property could be foreclosed on if you can't satisfy the note, and you might have to get the seller to come back in the picture to help clarify it all.   On top of that, you'd have a second rent-to-own contract with a tenant that could also be in jeopardy if you can't get the title clean or the property is foreclosed on.

This all sounds bleak, but I am all for being creative to make the deals happen.    I just wanted to highlight what you are up against/risk so you know where the pushback is coming from and what you might have to accept in terms of documentation of the sale.

Fingers crossed someone will pipe up with an investor-friendly real estate closing attorney that can help you get clear on the best path forward and options.     In the meantime, I'd also suggest reaching out to the local REIA and asking for attorney recommendations.

Good luck and keep us posted on how this turns out.

Kara Leboeuf · Answer

Thank you for that tip about waiting to record the closing.. Ill talk to our attorney about that. And thanks for that info. I havent done any rent to own. Just long term and short term rentals. Ill look into this more about them being able to get their deposits back. And yes, we watch and listen to a lot of pace! That has triggered a lot of our new creative finance strategies and stepping out of our comfort zones.