Through some direct marketing, an Executor of an estate reached out to me to sell his dad's house. The son doesn't want to continue making the mortgage payments and is open to selling subject to the mortgage balance and wants $5K to pay some bills. Loan balance is $204K and the house is worth $220K fixed up however the house is in good condition and move in ready and has a VA loan in place. The father was a veteran.
Due to interest rates rising, I suspect the lender may call the loan due if the deed changes name however I'm not sure if this deal can move forward because of triggering the due on sale clause and keeping the estate active to do Lease Option?
Any thoughts and advice would be great appreciated. Thanks BP!
@Ayodeji Kuponiyi At first glance there's no deal here. House for $220k and a balance of $204k, plus the $5k the son wants. My 2 cents.
@Tom S. I figured it would make a great Subject-To so that I can sell on a Lease Purchase.
I would agree that there isn't a deal there. Selling on the MLS would cost $13.2k in realtor fees (at 6%) putting you at 206.8k from $220k, so there's really nothing there.
@Aaron Taylor Because of the slim margins, I figured I could buy Subject to the loan and sell on a lease option.
@Ayodeji Kuponiyi Very complicated for such a slim margin deal. You buy the place Subject To, then turn around and sell it to someone with a lease option. The person moves their family into the home and hopes to exercise the option in 1 year. 2 months into it, the lender finds out and calls the loan due. Then what??
I wouldn't touch it, IMO.
@Tom S. Thanks for the insight. I thought there was an opportunity to help out the seller's son and possible buyer.
I have done subject to with slimmer margins than this. I would pull the trigger in this deal in a second. You don’t sell it on an option at market price, you increase the price, maybe $239k. Figure out what the rent is in the area. You get a monthly spread on the rent too. Get $15k or more from the tenant buyer upfront, monthly spread and another 15-30k on the back end.
@Todd J Killian Thanks for sharing. I'll PM you for more information.