Updated over 8 years ago on . Most recent reply
Subject to Purchase short term
I have been researching and reading everything I can get my hands on for about 6 months now about creative financing and subject to deals. We are in the process of putting my in-laws rental property under contract in Ohio. She needed cash now so she refinanced the property for an agreed upon price between us and then we are to take the property subject to. The tenants are moving out and we are planning on marketing this right away for a local buy and hold investor or occupant. The refi was done through a local credit union and my in-laws are worried about the due on sale clause and it ruining their relationship with the credit union. Obviously we are hoping to have the property sold ASAP, but things happen. How is the due on sale clause differ between traditional banks and local credit unions if at all? Are there things I can do to protect both parties that I may have not come across? My attorney is advising against a trust because he says it offers almost no benefits. Any advice would be great on this as it is becoming a frustrating 8 month journey....
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You should be able to do a Land Contract or do a Wrap, sometimes called an All Inclusive Trust Deed and you send your payment to the in-laws, they make the payment to the Credit Union and everyone is happy & protected. In a Land Contract Title doesn't change until the loan is paid off. In a Wrap Title changes immediately but the in-laws keep making payments directly to the CU. A Trust probably is not appropriate here. A Real Estate Attorney can do a Land Contract or Wrap.
Regarding the DOS clause. It says they "MAY", (it isn't required) call the loan due. If they do, you just transfer Title back to the inlaws and satisfy the breach. Then when things settle down again you can transfer Title back to you. As long as the payments are made, the Credit Union will probably not blink an eyelash. I may be missing something here but it seems the easiest thing to do is to make the payment to the inlaws and let them make the payment to the Credit Union just as they normally would.
You could also do a Lease/Option which doesn't transfer Title and everyone is happy & protected though a little less so than a Land Contract or Wrap. Lease/Option = simple, cheap - no attorney needed. Land Contract or Wrap $1500 to $3000 depending on attorney and closing.