DUE ON SALE INSURANCE

Investor · Member since 2021 · 26 posts · 20 votes

So I was listening to BP podcast on my way to work yesterday and heard Pace Morby mention Due on Sale clause insurance. Ive searched the web over the last 2 days and cant find any companies that offer this. Has anyone heard of this before or heard of a company that offers it? Im assuming this would protect me from the DOS clause when I transfer an investment prop from my name over to my LLC...

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Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes

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.

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Chris SeveneyBusiness Member
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Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
3y
Quote from @Doug Smith:

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.

Will you also teach how to lose your builders license as well? I wonder what the reason behind that was.... You have to do some bad stuff or be incompetent for that to happen.
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Doug SmithPro Member
Lender · Tampa, FL · Member since 2013 · 2k+ posts · 2k+ votes
3y
Quote from @Chris Seveney:

Quote from @Doug Smith:

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.

Will you also teach how to lose your builders license as well? I wonder what the reason behind that was.... You have to do some bad stuff or be incompetent for that to happen.

This will tell you how little I follow what that guy says. I had no ideal about that. Do tell...
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Joe S.Pro Member
Investor · San Antonio · Member since 2020 · 3k+ posts · 3k+ votes
2y

So this is somewhat of an old thread, but has anyone actually got any more real information?
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Joe S.Pro Member
Investor · San Antonio · Member since 2020 · 3k+ posts · 3k+ votes
2y
Quote from @Brady Hales:

Here is their website. They specifically mention the due on sale clause insurance.
https://www.equityassurance.us/

This is what came up when I went to the link/site you mentioned.
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Brady Hales
Rental Property Investor · Provo, UT · Member since 2021 · 46 posts · 50 votes
2y
Quote from @Joe S.:

Quote from @Brady Hales:

Here is their website. They specifically mention the due on sale clause insurance.
https://www.equityassurance.us/

This is what came up when I went to the link/site you mentioned.
Hmmm… not really sure what they are doing with their website. It didn’t used to do that. In any case I have since found out it isn’t really an insurance product since I first made a comment here. It is “assurance” which means they just make sure you close in a way that minimizes the chance of a due on sale but it is not an insurance product meaning they will take over your loan if it gets called due. Instead of going through them (whom I have never used) I would now just recommend finding a reputable transaction coordinator who specializes in creative finance and they will essentially do all the same stuff to minimize the chance of a due on sale happening. A typical fee for this service is in the $1000 - $1500 range.
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Tom GimerBusiness Member
DMV · Member since 2017 · 3k+ posts · 3k+ votes
2y
@Brady Hales A transaction coordinator can't minimize anything. Once a loan is called, it's called. Ask any of the many lender professionals on this site. Perhaps @Ron S. would like to comment.

$1000-$1500 for providing nothing of value just sounds like that TC becomes an additional defendant in a lawsuit.
The due on sale insurance provider can't even afford a free SSL certificate.
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Account Closed
Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes
2y
Quote from @Tom Gimer:

@Brady Hales A transaction coordinator can't minimize anything. Once a loan is called, it's called. Ask any of the many lender professionals on this site. Perhaps @Ron S. would like to comment.

$1000-$1500 for providing nothing of value just sounds like that TC becomes an additional defendant in a lawsuit.
The due on sale insurance provider can't even afford a free SSL certificate.

I asked a TC who was posting a lot here, hyping Pace Morby and the "Subto community" if he had any liability after putting together a transaction. He said "no, just like an escrow company or title company, once they finish their side in escrow, there's no liability". hehehehhehehehheh lol lol lol lol my sides hurt with roaring laughter.

I guess he doesn't know that Fidelity flew in 6 people from CA to tesitfy in a "Due on Sale" case I was involved in. That seemed pretty expensive to me. That was 6 people, a couple of whom were attorneys, that weren't in the office that day. Let's see, they had prep time, travel expenses, lost time doing "important" things. ;-)
Come to think of it, that may have been an important case at the appellate level for some reason.
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Brady Hales
Rental Property Investor · Provo, UT · Member since 2021 · 46 posts · 50 votes
2y
Quote from @Tom Gimer:

@Brady Hales A transaction coordinator can't minimize anything. Once a loan is called, it's called. Ask any of the many lender professionals on this site. Perhaps @Ron S. would like to comment.

$1000-$1500 for providing nothing of value just sounds like that TC becomes an additional defendant in a lawsuit.
The due on sale insurance provider can't even afford a free SSL certificate.

All I meant by minimize is that an experienced transaction coordinator should know the standard process for things like insurance on a subto transaction. I know many newer people to subject to transactions mess up the insurance on which cause the loan to get called due. I didn't mean that they can help after the fact though. The Due on Sell "insurance" provider I commented on here in this post was a few years ago when I was new to real estate and after I had first heard of the episode on the first Pace Morby interview Bigger Pockets did which was before I found out it wasn't really insurance at all. And since that time has passed I have become more discerning and would honestly never trust that site. Like you said they can't even pay for an SSL certificate and the site had been "under construction" for over a year. I am not very experienced in this area and am sure you have more experience than I do so people reading these comments should probably defer to you or Mike Hern on this topic.
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Brady Hales
Rental Property Investor · Provo, UT · Member since 2021 · 46 posts · 50 votes
2y
Quote from @Account Closed:

Quote from @Tom Gimer:

@Brady Hales A transaction coordinator can't minimize anything. Once a loan is called, it's called. Ask any of the many lender professionals on this site. Perhaps @Ron S. would like to comment.

$1000-$1500 for providing nothing of value just sounds like that TC becomes an additional defendant in a lawsuit.
The due on sale insurance provider can't even afford a free SSL certificate.

I asked a TC who was posting a lot here, hyping Pace Morby and the "Subto community" if he had any liability after putting together a transaction. He said "no, just like an escrow company or title company, once they finish their side in escrow, there's no liability". hehehehhehehehheh lol lol lol lol my sides hurt with roaring laughter.

I guess he doesn't know that Fidelity flew in 6 people from CA to tesitfy in a "Due on Sale" case I was involved in. That seemed pretty expensive to me. That was 6 people, a couple of whom were attorneys, that weren't in the office that day. Let's see, they had prep time, travel expenses, lost time doing "important" things. ;-)
Come to think of it, that may have been an important case at the appellate level for some reason.

I think that person is pretty naive. If I am not mistaken, anybody involved in the transaction has at least some liability which is why I know there are several brokerages that don't allow their agents to participate in some creative type transactions that they do not have state approved realtor contracts for. Like I said to @Tom Gimer though, I would defer anybody reading these comments to you guys because you guys have more experience and knowledge than me here.
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Ron S.
Paradise, CA · Member since 2015 · 1k+ posts · 871 votes
2y
Quote from @Tom Gimer:

@Brady Hales A transaction coordinator can't minimize anything. Once a loan is called, it's called. Ask any of the many lender professionals on this site. Perhaps @Ron S. would like to comment.

$1000-$1500 for providing nothing of value just sounds like that TC becomes an additional defendant in a lawsuit.
The due on sale insurance provider can't even afford a free SSL certificate.

You pretty much called it Tom! I couldn't add anything substantive to your valid input.
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