DUE ON SALE INSURANCE
Jimmy AlexanderPro Member
Investor · Member since 2021 · 26 posts · 20 votesDUE ON SALE INSURANCE
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Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes
4yOriginally posted by @David C.:
@Sylvia B. That's a good question. How common is it for this clause to be enforced?
It could be that the company offers this insurance because of the low likelihood that the DOS clause will be enforced. Just a thought.
Pace has been doing Subject To for almost two years now from what I can gather. He is in fact advocating a couple of things that are not prudent and I believe are reckless, but that comes from a lack of seasoning.
I think most of his background is fix & flip for iBuyers and in which he seems to have done well in that arena.
I've been doing Subject To for 25 years and in several states. I have never heard of Insurance for Due on Sale and I find it improbable that the insurance would actually be honored in the event it was needed. There are a dozen reasons insuring against Due on Sale is a non-winner for the insurance company.
In 25 years I've had two loans called because of Due on Sale.
One was in 2006 when someone I bought a house from in 2001 (5 years earlier) sued and claimed he never sold the house. Later in court he was proven to be a liar, but the loan was called anyway. I had to pay it off. But, that's a long story for another time & Yes, of course I won the case. You learn all of the weaknesses of Subject To when you've been through a few lawsuits.
The second time was in March 2020 when I did a Subject To on a Reverse Mortgage. The house sat vacant because I was busy with a few other flips and just hadn't gotten to it. A homeless "crowd" broke in and started creating problems in the neighborhood. The bank was notified by the police & I received a letter giving me 30 days to pay off the loan or they would start a foreclosure. I simply paid off the loan and life went on.
In case one, no one is going to have that happen to them. It is an entirely bizarre and psycho event.
In case two, if I had been working on the property or had someone living in it, the squatters would never have been a problem and the bank would never have been called.
So, had I bought Due on Sale Insurance, (which is like unicorns farting rainbows) the clause that says you can't have done something stupid like let squatters overrun your vacant property or let psychos sue you, would negate the insurance company's need to pay the insurance and I'd have to sue the insurance company for specific performance. And 2 years later and lots of legal fees, the courts would decide who is right. And I'm guessing the "insurance" provider would have a pretty strong case that they don't have to pay out.
There is great reward in using Subject To, legally and ethically and correctly. There is great risk in not knowing what you don't know.
86 Replies
- Member since 2021 · 18 posts · 4 votes4y
I did some research about the actual name of the company that Pace Morby was talking about on his podcast/BP, and it seems to be this one:
https://www.linkedin.com/compa...
It's Equity Assurance, LLC
Any other name suggested like: www.equityassurcance.us does not seem to be correct or exist.
- Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes4y
One thing people should know about the whole due on sale is the mortgage payment flow.
Mortgage payments typically go to a mortgage servicing company - in many instances these companies are subsidiaries or 3rd parties to the lender. There roll is to collect and apply payments. These services have hundreds of thousands to millions of loans. They do not spend the time or money on a paying loan to see if the current owner is on title.
Our primarily line of business is in notes - we use a 3rd party servicer and we have never requested or even have cared if a loan was transferred to a new borrower who is paying because
1. We don’t want the property or spend time to foreclose
2. When loan is paying, if new owner stops paying We still can foreclose on old borrower who actually would put up less of a fight and new owner can’t do anything except pay us off then.
Only time it makes sense is when borrower fails.
Some will say well banks can lend that $ now at a higher rate - but think of the time and effort banks would have to go through to figure out which loans were sold sub2 and the labor to call the loans etc. That won’t move the needle on the banks bottom line at all.
7e investments53 Reviews - Member since 2022 · 16 posts · 5 votes4y
Quote from @Account Closed:
Originally posted by @David C.:
@Sylvia B. That's a good question. How common is it for this clause to be enforced?
It could be that the company offers this insurance because of the low likelihood that the DOS clause will be enforced. Just a thought.
Pace has been doing Subject To for almost two years now from what I can gather. He is in fact advocating a couple of things that are not prudent and I believe are reckless, but that comes from a lack of seasoning.
I think most of his background is fix & flip for iBuyers and in which he seems to have done well in that arena.
I've been doing Subject To for 25 years and in several states. I have never heard of Insurance for Due on Sale and I find it improbable that the insurance would actually be honored in the event it was needed. There are a dozen reasons insuring against Due on Sale is a non-winner for the insurance company.
In 25 years I've had two loans called because of Due on Sale.
One was in 2006 when someone I bought a house from in 2001 (5 years earlier) sued and claimed he never sold the house. Later in court he was proven to be a liar, but the loan was called anyway. I had to pay it off. But, that's a long story for another time & Yes, of course I won the case. You learn all of the weaknesses of Subject To when you've been through a few lawsuits.
The second time was in March 2020 when I did a Subject To on a Reverse Mortgage. The house sat vacant because I was busy with a few other flips and just hadn't gotten to it. A homeless "crowd" broke in and started creating problems in the neighborhood. The bank was notified by the police & I received a letter giving me 30 days to pay off the loan or they would start a foreclosure. I simply paid off the loan and life went on.In case one, no one is going to have that happen to them. It is an entirely bizarre and psycho event.
In case two, if I had been working on the property or had someone living in it, the squatters would never have been a problem and the bank would never have been called.
So, had I bought Due on Sale Insurance, (which is like unicorns farting rainbows) the clause that says you can't have done something stupid like let squatters overrun your vacant property or let psychos sue you, would negate the insurance company's need to pay the insurance and I'd have to sue the insurance company for specific performance. And 2 years later and lots of legal fees, the courts would decide who is right. And I'm guessing the "insurance" provider would have a pretty strong case that they don't have to pay out.
There is great reward in using Subject To, legally and ethically and correctly. There is great risk in not knowing what you don't know.
Thanks for your input @Account Closed. Could you elaborate on the things Pace advocates which you believe are reckless and why? (I'm a newbie and am considering this type of creative financing for getting my first couple properties) Thanks!
- Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes4y
Quote from @Michael Page:
Quote from @Account Closed:
Originally posted by @David C.:
@Sylvia B. That's a good question. How common is it for this clause to be enforced?
It could be that the company offers this insurance because of the low likelihood that the DOS clause will be enforced. Just a thought.
Pace has been doing Subject To for almost two years now from what I can gather. He is in fact advocating a couple of things that are not prudent and I believe are reckless, but that comes from a lack of seasoning.
I think most of his background is fix & flip for iBuyers and in which he seems to have done well in that arena.
I've been doing Subject To for 25 years and in several states. I have never heard of Insurance for Due on Sale and I find it improbable that the insurance would actually be honored in the event it was needed. There are a dozen reasons insuring against Due on Sale is a non-winner for the insurance company.
In 25 years I've had two loans called because of Due on Sale.
One was in 2006 when someone I bought a house from in 2001 (5 years earlier) sued and claimed he never sold the house. Later in court he was proven to be a liar, but the loan was called anyway. I had to pay it off. But, that's a long story for another time & Yes, of course I won the case. You learn all of the weaknesses of Subject To when you've been through a few lawsuits.
The second time was in March 2020 when I did a Subject To on a Reverse Mortgage. The house sat vacant because I was busy with a few other flips and just hadn't gotten to it. A homeless "crowd" broke in and started creating problems in the neighborhood. The bank was notified by the police & I received a letter giving me 30 days to pay off the loan or they would start a foreclosure. I simply paid off the loan and life went on.In case one, no one is going to have that happen to them. It is an entirely bizarre and psycho event.
In case two, if I had been working on the property or had someone living in it, the squatters would never have been a problem and the bank would never have been called.
So, had I bought Due on Sale Insurance, (which is like unicorns farting rainbows) the clause that says you can't have done something stupid like let squatters overrun your vacant property or let psychos sue you, would negate the insurance company's need to pay the insurance and I'd have to sue the insurance company for specific performance. And 2 years later and lots of legal fees, the courts would decide who is right. And I'm guessing the "insurance" provider would have a pretty strong case that they don't have to pay out.
There is great reward in using Subject To, legally and ethically and correctly. There is great risk in not knowing what you don't know.
Thanks for your input @Account Closed. Could you elaborate on the things Pace advocates which you believe are reckless and why? (I'm a newbie and am considering this type of creative financing for getting my first couple properties) Thanks!
Sure, I did a post on it at https://www.biggerpockets.com/...
Another big issue is that he has people lend money in 2nd position on creative financing deals. That part is reckless and I can't imagine peole understand the risk. When the peanut butter hits the fan and eventually it will, a whole lot of people are going to lose money and they will contact the AG's office for relief (that means lawsuits). Not a pretty picture.
In the post I didn't name him specifically because there are common errors taught or omitted by the "guru's".
Someone said he charges $7,800. And a common complaint is that people end up not buying a property. That part isn't his fault. People underestimate the time, money and amount of work this takes. If fact you don't need to pay to have a guru teach you. You can team up with someone and use that money to buy a house. But, if it makes some feel good to give their money away and join a "happy" club, that is up to them.
- Member since 2022 · 16 posts · 5 votes4y
Quote from @Account Closed:
Quote from @Michael Page:
Quote from @Account Closed:
Originally posted by @David C.:
@Sylvia B. That's a good question. How common is it for this clause to be enforced?
It could be that the company offers this insurance because of the low likelihood that the DOS clause will be enforced. Just a thought.
Pace has been doing Subject To for almost two years now from what I can gather. He is in fact advocating a couple of things that are not prudent and I believe are reckless, but that comes from a lack of seasoning.
I think most of his background is fix & flip for iBuyers and in which he seems to have done well in that arena.
I've been doing Subject To for 25 years and in several states. I have never heard of Insurance for Due on Sale and I find it improbable that the insurance would actually be honored in the event it was needed. There are a dozen reasons insuring against Due on Sale is a non-winner for the insurance company.
In 25 years I've had two loans called because of Due on Sale.
One was in 2006 when someone I bought a house from in 2001 (5 years earlier) sued and claimed he never sold the house. Later in court he was proven to be a liar, but the loan was called anyway. I had to pay it off. But, that's a long story for another time & Yes, of course I won the case. You learn all of the weaknesses of Subject To when you've been through a few lawsuits.
The second time was in March 2020 when I did a Subject To on a Reverse Mortgage. The house sat vacant because I was busy with a few other flips and just hadn't gotten to it. A homeless "crowd" broke in and started creating problems in the neighborhood. The bank was notified by the police & I received a letter giving me 30 days to pay off the loan or they would start a foreclosure. I simply paid off the loan and life went on.In case one, no one is going to have that happen to them. It is an entirely bizarre and psycho event.
In case two, if I had been working on the property or had someone living in it, the squatters would never have been a problem and the bank would never have been called.
So, had I bought Due on Sale Insurance, (which is like unicorns farting rainbows) the clause that says you can't have done something stupid like let squatters overrun your vacant property or let psychos sue you, would negate the insurance company's need to pay the insurance and I'd have to sue the insurance company for specific performance. And 2 years later and lots of legal fees, the courts would decide who is right. And I'm guessing the "insurance" provider would have a pretty strong case that they don't have to pay out.
There is great reward in using Subject To, legally and ethically and correctly. There is great risk in not knowing what you don't know.
Thanks for your input @Account Closed. Could you elaborate on the things Pace advocates which you believe are reckless and why? (I'm a newbie and am considering this type of creative financing for getting my first couple properties) Thanks!
Sure, I did a post on it at https://www.biggerpockets.com/...
Another big issue is that he has people lend money in 2nd position on creative financing deals. That part is reckless and I can't imagine peole understand the risk. When the peanut butter hits the fan and eventually it will, a whole lot of people are going to lose money and they will contact the AG's office for relief (that means lawsuits). Not a pretty picture.
In the post I didn't name him specifically because there are common errors taught or omitted by the "guru's".
Someone said he charges $7,800. And a common complaint is that people end up not buying a property. That part isn't his fault. People underestimate the time, money and amount of work this takes. If fact you don't need to pay to have a guru teach you. You can team up with someone and use that money to buy a house. But, if it makes some feel good to give their money away and join a "happy" club, that is up to them.
That is very helpful, thank you! - 3yZeona McIntyrePro MemberReal Estate Agent · Boulder, CO · Member since 2015 · 284 posts · 226 votes
@Account Closed have you used contract for deed instead? I’m still learning but this keeps the title in the sellers name until the full loan is paid off. I guess this is riskier for the buyer but it is how far loans operate so it’s commonly used. Just trying to look at ways to avoid due on sale as I’ve heard it’s being called more now as interest rates go up.
- New to Real Estate · Lindale, TX · Member since 2022 · 1 post · 2 votes3y
A bit late here, I know the owner of Equity Assurance pretty well. Pace misunderstood what they do and that's caused some confusion. It's definitely not insurance.
- Rental Property Investor · Decatur, GA · Member since 2018 · 19 posts · 4 votes3y
Quote from @Brady Hales:
Here is their website. They specifically mention the due on sale clause insurance.
https://www.equityassurance.us/
Did they change their website.
- Rental Property Investor · Decatur, GA · Member since 2018 · 19 posts · 4 votes3y
Trying to get more details about this having trouble finding the company can anyone assist.
- Rental Property Investor · Provo, UT · Member since 2021 · 46 posts · 50 votes3y
- Member since 2020 · 101 posts · 34 votes3y
This is a result of direct communication with the company:
"first of all this is not an Insurance, our Company works with the Mortgage
Company in the event the Due on Sale Clause is exercised, as real estate investors there is a great deal of opportunities in “subject to” transactions. However, currently the “subject to” is always subject to the existing mortgage company exercising their legal rights to foreclose on the subject property based on the “Due On Sale Clause” which is contained in all mortgages and/or deeds of trust on real property.
We make it easier for you to close with the seller, we provide you documentation to share with them to ease the fear of the Due on Sale clause.
Equity Assurance, LLC, in the event that the existing unsatisfied mortgage that is to remain in place after the transaction has completed decides to exercise their rights under the aforementioned "Due On Sale Clause".In the event, that the "Due On Sale Clause" foreclosure is initiated by the existing mortgage company and/or bank, Equity Assurance, LLC will interject into the foreclosure transaction to work with you on the "Due On Sale Clause" for the investor by assuring that the covered loan and terms will remain in place. We have never been unsuccessful in this process. We have your back with many years of working with Mortgage Companies and investors, we have a team that is professional and is great at negotiating and being on your team. We also work with you on making sure you have all your Documents in place and you are communicating the right information to the seller and the Mortgage Company. Cost of this service is 1.25% of the original Mortgage amount example ($200,000 = $2,500), no other charges. Minimum charge $500.00" - Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes3y
Quote from @Tom Gimer:
So essentially the product has morphed from due on sale "insurance" to due on sale "assurance" to due on sale "we'll have your back".
I am curious if they have your back now when rates are 2x what they were 3 years ago and a bank calls the loan with due on sale and how are they going to "have your back"...
7e investments53 Reviews - 3yTom GimerBusiness MemberDMV · Member since 2017 · 3k+ posts · 3k+ votes
@Chris Seveney I think we both know this company can't do anything to keep the covered loan and terms in place. Once the lender invokes the due on sale nobody is going to "interject into the foreclosure transaction" and prevent a foreclosure without a payoff. They state that they have never been unsuccessful in this process and that's probably true because they have yet to process a "claim" in a decade due to market conditions. That's over. Once the cascade of demands coming their way materializes the website will likely go fully offline.
Gimer Law516 Reviews - Real Estate Agent · Orlando, FL · Member since 2014 · 46 posts · 11 votes3y
@Account Closed based on your experience, should sub-tos only be utilized in fix-n-flip situations or could it be used when attempting to have a property as a primary residency? Is there just too much risk with the latter?
- Rental Property Investor · Provo, UT · Member since 2021 · 46 posts · 50 votes3y
@Mona B. you can do either. It is important to have a big bank as the provider of the mortgage instead of a small regional credit union. As long as the seller is on board and you do your dilligence with all the paperwork that needs to be in place you will be fine. If you are worried about it just purchase on an agreement for sale. You take possession of the property but the deed isn't recorded until the loan is paid off. Then the bank will never know.
- Member since 2020 · 101 posts · 34 votes3yHere is the link to Pace Morby's description of Due on Sale Insurance.
- 3yRyan DenmanPro MemberErie, CO · Member since 2018 · 44 posts · 14 votes
Hi @Jimmy Alexander,
I've inquired about this as well and with some of Pace's own guru program graduates and it is just a myth. With the way interest rates have gone, there is no way a company could function as he said it would (if the DOS is triggered, then the 'insurance company' would create a loan with the terms of the original loan). I think his comment on this was largely to try to recruit people into his guru program. If you have ever watched his videos, he does have a disparaging view of the BP community, so I'm not sure why they let him on the podcast to begin with.
@pacej#0 any comments?
- Rental Property Investor · Provo, UT · Member since 2021 · 46 posts · 50 votes3y
@Ryan Denman he has his bigger pockets book release starting next month and he tells all his students to join bigger pockets. I think he is just blunt and tells things the way he feels about them both the good and bad.
- Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes3yThis is personal opinion. I would not have a problem buying a property Subject To for my own residence. I am aware of the risks, I provide disclosures, disclosures, disclosures, I close through escrow, I order a title report, escrow records the warranty deed, I don't use quit claim deeds, I am aware of every one and every entity that might have an interest in the property, I don't let someone stay in the property after they have sold and collect rent from them, I don't miss any payments, I have insurance changed to my name, I have access to the lender if I need it, I make the payments directly to the lender so I can make sure the payment gets paid, I take care of any problems with the city or county regarding weeds, waste, etc, I don't let the house sit vacant, I have backups in the event of a Due on Sale call which I've had 2 in 25 years, I don't believe in "Due on Sale Insurance" or "Tooth Fairies" or "Unicorns Farting Rainbows", all of which are amusing but don't in reality exist, I realize that if I screw up and miss payments it affects the sellers credit and can result in a lawsuit, I have a tightly written contract, I am well funded and I understand the law. If you do things exactly like I do things, in the exact markets I do them in, you are pretty darn (but not absolutely) safe.
Quote from @Mona B.:
@Account Closed based on your experience, should sub-tos only be utilized in fix-n-flip situations or could it be used when attempting to have a property as a primary residency? Is there just too much risk with the latter?
- Flipper/Rehabber · Sugar Land, TX · Member since 2015 · 17 posts · 6 votes3y
I realize I'm responding to a 2 year old post but I noticed an important nuance missing from the discussion. DOS insurance provides comfort to the Seller that the Buyer will pay off the mortgage when the DOS clause is enforced. This policy directly addresses a Seller's objection to the deal. Of course, it's better if you don't have to pay for it, but if it's the only way to do the deal and there is room in the numbers, it's a great tool in the toolbox. That's how I've looked at it. It's more "Sales" than "Protection."
- 3yCasey S.Pro MemberMember since 2023 · 6 posts · 4 votes
Quote from @Account Closed:
Originally posted by @David C.:
@Sylvia B. That's a good question. How common is it for this clause to be enforced?
It could be that the company offers this insurance because of the low likelihood that the DOS clause will be enforced. Just a thought.
Pace has been doing Subject To for almost two years now from what I can gather. He is in fact advocating a couple of things that are not prudent and I believe are reckless, but that comes from a lack of seasoning.
I think most of his background is fix & flip for iBuyers and in which he seems to have done well in that arena.
I've been doing Subject To for 25 years and in several states. I have never heard of Insurance for Due on Sale and I find it improbable that the insurance would actually be honored in the event it was needed. There are a dozen reasons insuring against Due on Sale is a non-winner for the insurance company.
In 25 years I've had two loans called because of Due on Sale.
One was in 2006 when someone I bought a house from in 2001 (5 years earlier) sued and claimed he never sold the house. Later in court he was proven to be a liar, but the loan was called anyway. I had to pay it off. But, that's a long story for another time & Yes, of course I won the case. You learn all of the weaknesses of Subject To when you've been through a few lawsuits.
The second time was in March 2020 when I did a Subject To on a Reverse Mortgage. The house sat vacant because I was busy with a few other flips and just hadn't gotten to it. A homeless "crowd" broke in and started creating problems in the neighborhood. The bank was notified by the police & I received a letter giving me 30 days to pay off the loan or they would start a foreclosure. I simply paid off the loan and life went on.In case one, no one is going to have that happen to them. It is an entirely bizarre and psycho event.
In case two, if I had been working on the property or had someone living in it, the squatters would never have been a problem and the bank would never have been called.
So, had I bought Due on Sale Insurance, (which is like unicorns farting rainbows) the clause that says you can't have done something stupid like let squatters overrun your vacant property or let psychos sue you, would negate the insurance company's need to pay the insurance and I'd have to sue the insurance company for specific performance. And 2 years later and lots of legal fees, the courts would decide who is right. And I'm guessing the "insurance" provider would have a pretty strong case that they don't have to pay out.
There is great reward in using Subject To, legally and ethically and correctly. There is great risk in not knowing what you don't know.
@Account Closed, given your SubTo experience, how do you calm the nerves of a seller who is concerned that their DTI would be negatively impacted by the buyer not paying off their existing mortgage? I've heard that by having a servicing company move money from the buyer's account to make on-time payments each month, documentation can be provided to a loan officer who'd then be able to remove that debt from the seller's DTI as they work to gain pre-approval to acquire a new home. What's your stance on that? Thx!
- Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes3y
Quote from @Casey S.:
Quote from @Account Closed:
Originally posted by @David C.:
@Sylvia B. That's a good question. How common is it for this clause to be enforced?
It could be that the company offers this insurance because of the low likelihood that the DOS clause will be enforced. Just a thought.
@Account Closed, given your SubTo experience, how do you calm the nerves of a seller who is concerned that their DTI would be negatively impacted by the buyer not paying off their existing mortgage? I've heard that by having a servicing company move money from the buyer's account to make on-time payments each month, documentation can be provided to a loan officer who'd then be able to remove that debt from the seller's DTI as they work to gain pre-approval to acquire a new home. What's your stance on that? Thx!
That isn't a black & white question as much as we'd like it to be. It depends on the new lender for the most part. Some will accept proof that the payments are being made. Some are wary of someone taking over someone else's loan.
It's going to become a much bigger problem as poorly trained and poorly prepared new "Sub To" students from a particular "community" start missing payments. Since it's the new "shiny object" and it's enticing to the "get rich quick" set, it will expand quickly and then it will blow over and leave a pile of broken contracts and unpaid mortgages and lawsuits in its wake. Look up “Tulip Mania”. Not everyone, but more than can be ignored.
Lenders aren't dumb. And, it isn't actually their money they lend. It's the depositor's money. And regulators get involved when things like missed payments spike. That will make it harder for someone who sold their house but didn't pay off the loan, to get another loan. I'm not negative on Subject To, don't get me wrong, but I've listened to and watch the "Guru of the day's" teachings and they are exciting, but they lack understanding. And what you don't know, sometimes kills you, but it certainly gets you looked at by the Attorney General. When a lawsuit happens, they look at every property you’ve touched in the last seven years. That’s a long time of exposure.
So, to answer your question, I'd call a few mortgage brokers, (don't worry about calling banks they are difficult to begin with), and I'd ask the brokers, "Do you have any lenders that will do a purchase loan for someone who still has a performing loan in his name, but someone else is making the payment." You'll get a lot of head scratching and some will say that's illegal, (just move on to the next broker, it isn't illegal, when done legally & wisely) and ask them what documentation they will need to close the loan. They will know which lenders require which kind of documentation. Then you start building that documentation from the beginning.
I Buy using Subject To and sell on Lease Option which I explain at
I've put together a spreadsheet that shows how all of this works. If you'd like a copy just DM me. Click to https://www.biggerpockets.com/users/mikeh695 & Tap the message icon in the upper right corner of your screen
- 3yDoug SmithPro MemberLender · Tampa, FL · Member since 2013 · 2k+ posts · 2k+ votes
I've got a great idea. I'm going to create a course based on a legally questionable real estate idea, gloss over the parts that are sketchy, and use it to build an army of disciples that will not only pay for courses on my sketchy idea, but will blindly defend those ideas when industry and legal experts question it. I've got to hand it to him, he's built an empire and he's far more charismatic than I. I'm somewhat jealous.
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