Subject-To Transaction With Wrap-Around Mortgage (TEXAS)

Subject-To Transaction With Wrap-Around Mortgage (TEXAS)

Member since 2019 · 4 posts · 0 votes

Hello I am new investor here in Fort worth, Texas. I want to ask ask a few questions before I start meeting with motivated sellers. My main goal is to do marketing to attract motivated sellers and help them by creating a win-win. I want to find people who are in pre-foreclosure and catch up their payments by finding a motivated buyer who can't get regular financing through a bank. I will be doing a double closing at the attorneys office. I plan to use the buyers down payment to catch up the payments, attorney fees, etc. I am essentially backing into the deal. I understand there is ALOT I need to disclose to both the seller & buyer. I want to make sure I am thorough in doing that. I plan to use Scott Horne or Jones Kimball law firm. I just want to make sure I am correct in approaching this with the attorney.

My main questions:


Considering subject-to/wrap is such a complex transactions with alot to disclose when I meet with seller/end-buyer.... How do I obtain the addendum with all the disclosures? Do I have to type up everything myself? Does an Attorney who does hundreds of these transactions such as Scott Horne have all the paperwork ready? Do I have to pay him a consultation fee to gather the paperwork for when I meet with the seller or can they simply email/fax it to me? Every attorney I have called has said bring me a deal first but I can't bring them a deal without disclosing everything to the seller at the kitchen table when I get them under contract. Maybe I am confused on how this all plays out, maybe there was a miscommunication, or the attorneys I have called so far aren't familar with all the disclosures involved in a subject-to transaction. I want to make sure I understand how this all works before I call the best attorneys in my area. Thanks for your time!

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Residential Real Estate Broker · College Station, TX · Member since 2013 · 1k+ posts · 969 votes
6y

@Alex Hendershott. What I think the Attorney are saying is "Don't Bother Me Until You Have a Viable Deal"!

In general terms seems your intent is to wholesale deals. I'm certainly not the expert in "Subject To" deals, but I foresee you expending tons of time and effort for an occasional return. 

Good Luck!

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  • Residential Real Estate Broker · College Station, TX · Member since 2013 · 1k+ posts · 969 votes
    6y

    @Alex Hendershott. What I think the Attorney are saying is "Don't Bother Me Until You Have a Viable Deal"!

    In general terms seems your intent is to wholesale deals. I'm certainly not the expert in "Subject To" deals, but I foresee you expending tons of time and effort for an occasional return. 

    Good Luck!

  • Member since 2019 · 4 posts · 0 votes
    6y

    @Jim Cummings Thanks for quick response. I can't bring a deal until I have the proper addendum. Would I bring the seller there to the attorney's office then drop all the disclosures on them at closing? That doesn't make sense to me.

         It is similar to wholesaling in that I will be getting the seller under contract then selling at a higher price but I will be buying the house subject-to the existing lien at a low interest rate and selling the house at a higher interest rate. I will be making positive cash flow every month for a 30 year term or once the buyer refinances and cashes me out on the equity. There are many more creative ways to profit with this strategy then the typical wholesaling where you only profit from the assignment fee and it requires you to continuously work.

  • Realtor · Portland, OR · Member since 2020 · 87 posts · 43 votes
    6y

    @Alex Hendershott

    What you are doing is not wholesaling. It is Contract Assignment.

    Biggest problem with this side of the biz is honesty, don’t commit fraud or advertise fraudulently.

    Don’t say you are the buyer, if are not. Be honest and disclose terms.

    “Dear seller I am an investor and I assign contracts to retail buyers...” etc.

    You do not need a special addendum. One contract stating the terms etc. with an “assignment clause.”

    If you are a good, honest person and want to build a business you will tell them upfront and make it to where they approve whoever you are assigning it to!

    Feel free to make a few hundred bucks as well every month in the spread. But if you do that, you will carry responsibility moving forward to that seller and be responsible for the note.

    Anyway- feel free to DM. Just asking you don’t kill the golden goose ;)

  • Realtor · Portland, OR · Member since 2020 · 87 posts · 43 votes
    6y

    @Jim Cummings if you are not in this space, why comment?

  • Member since 2019 · 4 posts · 0 votes
    6y

    @Account Closed Hello Ben, I want to be very honest and upfront with the seller & buyer. That's why I want to make sure I have proper disclosure forms. I heard it's not a good idea to close these kind of deals with only the standard TREC form. My partners and I have been researching this subject a long time now and from what I have heard from several people is that what I am going to need is a Addendum which includes all the disclosures such as the Due on Sale clause, how the loan stays in the name of the seller, authorization to release information, etc. Here below I have a list of what I am going to be using that has been specifically crafted for what I am doing by an attorney I plan to use. I am just not sure how I am suppose to disclose all of this with seller when contracting the house without getting the paperwork from the attorney first. I also want to make it very clear that I am buying the house as in I am going to be making payments on behalf of the seller with the loan staying in the seller's name. Thank you for your time :)

    Seller Disclosure form
    P&S Agreement (contract)
    Sub To Addendum
    Seller Disclosure Addendum
    Sellers Disclosure (Trec)
    Authorization to release Loan information
    Homeowners Cancellation Form
    Notification to Lender of Change of Address of Borrower
    Limited Power of Attorney
    Special Durable P of A for Real Estate Transactions
    Affidavit of Marital Status
    General Warranty Deed Subject To Existing Mortgage

  • Residential Real Estate Broker · College Station, TX · Member since 2013 · 1k+ posts · 969 votes
    6y

    @Account Closed. Thanks for your perspective - perhaps you are right! 

    In my 30-years experience, I've seen very few of these transactions. Maybe I was not working in the right areas for  these types of transactions.

    Hopefully, you have loads of experience and you can assist @Alex Hendershott with the type of documentation he is seeking.  

  • Realtor · Portland, OR · Member since 2020 · 87 posts · 43 votes
    6y

    @Alex Hendershott

    Each state requires different documents etc. Understand what you are buying and selling is not a deed, but title aka “rights” to the property.

    If you really want to do a “retail sandwich,” you will be layering contract for deeds. Where it goes bad and can get fraudulent is buyer A doesn’t know you sold on contract to buyer C.

    You want to dump 30 pages of disclosures when simple clauses and notices will do.

    All of these clauses you can find online and add to a standard contract. Then—- I would have your attorney review (to help you save $).

    Here is something to add as well. A “Hold harmless” clause- stating the general terms. Seller A is aware Alex H is a real estate investor and will be reserving the right to sell property x via contract, outright etc.”

    This clause alone should save you quite a bit of trouble. It can’t save you from having to go to court ever, anybody can sue anybody for any reason, but it can show the judge that you are open and honest.

    This is also why my phones now record closing calls and conversations fyi.

    Shocker: You will not be dealing with the most sophisticated sellers at times and there are reasons for why they are distressed.

    Learned my lessons and only deal now with higher end.

    Hope this helps

  • Realtor · Portland, OR · Member since 2020 · 87 posts · 43 votes
    6y

    @Jim Cummings typical BP response. Cool. 30 yrs experience, and you just called Contract for Deed “wholesaling.” Nice.

  • Greg H.Pro Member
    Moderator
    Broker/Flipper · Austin, TX · Member since 2013 · 4k+ posts · 4k+ votes
    6y
    Originally posted by @Account Closed:

    @Jim Cummings typical BP response. Cool. 30 yrs experience, and you just called Contract for Deed “wholesaling.” Nice

    Also a very "typical" response on BP where a poster thinks one size fits all for 50 states.  Contract for Deed in Texas while not illegal, has requirements so stringent that no investor would even attempt to sell in this manner

  • Realtor · Portland, OR · Member since 2020 · 87 posts · 43 votes
    6y
    Originally posted by @Greg H.:
    Originally posted by @Account Closed:

    @Jim Cummings typical BP response. Cool. 30 yrs experience, and you just called Contract for Deed “wholesaling.” Nice

    Also a very "typical" response on BP where a poster thinks one size fits all for 50 states.  Contract for Deed in Texas while not illegal, has requirements so stringent that no investor would even attempt to sell in this manner

    Subject-to is no different than any real estate transaction... the key is to disclose, disclose and over disclose. 

    Anyone can sue anyone for anything. If what you are doing as a broker is so safe and simple, why do you have E & O Insurance? There is risk.

    Before it gets personal, review the post please before you try to be smart.

  • Greg H.Pro Member
    Moderator
    Broker/Flipper · Austin, TX · Member since 2013 · 4k+ posts · 4k+ votes
    6y

    @Account Closed

    I responded to you the same way you responded to another poster

    My reply was you suggesting contract for deed as a tool. Since the poster was asking about Sub2 in Texas, a contract for deed is absolutely not the way to go due to the stringent requirements. Below is a good article listing the requirements and penalties

    https://lonestarlandlaw.com/executory-contracts-in-texas/

  • Specialist · OH · Member since 2019 · 59 posts · 18 votes
    6y

    @Alex Hendershott

    Get ahold of attorney Allison Tipton- way cheaper than Scott horne and she’s very responsive and thorough

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