Investor · Woodville, VA · Member since 2013 · 10 posts · 3 votes
Hello,
I've successfully done my first few "Sub2" and "Contract for Sale" deals, but I've been wondering about the true ramifications for the sellers. Assuming they're not going to become renters forever, I'd imagine that these sellers would have a much harder time getting another loan on a house they might want to buy in a few years. I'm flipping "Contract for Sale" deals. For my portfolio, I'm only doing Sub2 deals and I'm not giving the sellers any promises about refinancing in a few years, so I'm essentially intending on keeping their loans in place for a long time. At the end of the day, I want to do nothing that's unethical and nothing that's harmful to the sellers. Please let me know what you think about the negative implications of these type of deals for the sellers.
San Antonio, TX · Member since 2009 · 3k+ posts · 1k+ votes
12y
In these types of deals, the seller is still legally liable for the mortgage since it's still in their name. They place trust in the investor that the home will be paid on time every month. Should the investor default, then the seller is on the hook possibly resulting in negative credit report ratings.
Unfortunately, there are many deals like these that go sour. Situations and circumstances change. Ultimately, it boils down to a question of ethics and doing the right thing. This is why many investors, myself included, prefer to just do a straight deal so everyone can move on and not be tied down to the property.