Just Closed "Subject To" have some questions, will to pay for consult.

[Iain A.]

Closed on a Sub2 in Michigan last week. I'm now on title, seller is still the borrower. My plan is to just keep the property for good. I've done plenty of deals as a former agent, but this is my first Sub2 on my own property, and a few things that popped up after closing pushed me into a deep-dive on worst-case scenarios. Now I want sanity checks from people who actually operate Sub2s in the real world—not guru scripts.

I have enough to pay off loan now and have current pay offs ready to go for the next couple weeks, so, now that I’m on title and this isn’t some flim flam guru crap I’m considering just paying it all off. Although, I am not sure that’s wise unless or if I am forced to do so considering how long my capital would be locked up for. 

Power of Attorney:
The POA my title attorney drafted is basically worthless; it terminates when the deed transfers, so it doesn't survive closing. That made me look harder at whether a POA even matters. From what I've found, once the deed is recorded I count as a successor-in-interest. Wells Fargo has to give me access to payoff and reinstatement amounts, and I can reinstate or pay off without needing the seller. For those who've actually done Sub2 in Michigan: do you even bother with POAs, or is that more of a guru artifact?

Seller cooperation:
I initially assumed I'd need the Seller for anything involving the loan. From what I'm seeing, that's wrong. As the titled owner, I can reinstate, pay off, or even redeem the property if it ever went to sheriff's sale. Michigan law allows anyone "claiming under the mortgagor" to redeem, which seems to cover me. Has anyone here actually reinstated or paid off without the seller involved? As of now our plan is for me to log into his account and pay the PITI myself.

Insurance and Escrow:

I went ahead and got insurance in my name with the mortgagor as Wells Fargo with the correct loan number, so, it is insured. The insurer sent Wells a copy. Wells did just call the mortgagee yesterday, he couldn’t answer so we are not sure what about, my guess would be the change in insurance. I’d like to have him cancel his escrow, get his money back and that way I can just pay principal and interest to Wells Fargo and worry about taxes and insurance on my own.

Due-on-sale risk:
This one feels mostly theoretical. It's a straight person-to-person Sub2—no LLC, no delinquency, insurance handled correctly, not messing with escrow. Anyone here ever had Wells Fargo actually call a DOS on a clean deal like that? I'd like to cancel the escrow, get the seller his few grand in there, and just pay Princiapl and Interest to Wells Fargo.

Foreclosure & protecting equity:

I always assumed that if a Sub2 goes sideways and the lender forecloses, I lose all my equity. Multiple attorneys told me that's not how Michigan works. If the property sells at sheriff's sale above what's owed, the surplus goes to the titled owner. And even if it sells low, I still have the 6-month redemption window. So if WF forecloses and bidding hits, say, $90k on a $62k payoff—do I realistically walk with the surplus? Anyone lived this process?

Where I’m actually at:
I’m not nervous about real estate generally; I just hate relying on a seller for anything. When I map it out, a lot has to go wrong for me to actually lose money: WF calls the loan, I can’t refinance or pay it off, seller doesn’t cooperate, foreclosure goes the full distance, the sale price is low, and I don’t redeem. That’s a long string of failures, but I want to make sure my understanding is accurate.

My questions for the BP veterans:

1. Does a POA really matter on a Michigan Sub2?
   
   
2. Has anyone reinstated or paid off without the seller?
   
   
3. Any actual DOS calls from Wells Fargo on a clean Sub2?
   
   
4. In Michigan, does the titled owner really get the surplus after the sheriff's sale?
   
   
5. Is there any realistic way to lose all equity if payments stay current?
   
   

Would appreciate input from people who've actually run multiple Sub2 deals—especially in Michigan or with Wells Fargo. I'm trying to cut through the noise and get the real story.

I also appreciate just how much of a fad thing this is. It has been such a challenge to find attorneys, title companies and the like who have any idea what a subject to deal is. Thanks! 

[Jay Hinrichs]

Quote from @Iain A.:

Quote from @Drew Sygit:

POA - should have been limited to anything related to the mortgage, only ending when mortgage paid off.

- will the seller sign a new one?
- I you have POA, you dn't need seller cooperation.

LLC - should have put it in a single-member LLC to avoid due-on-sale scrutiny.

Insurance - should have stayed in seller's name with LLC and you added as "Additionally Insured" to avoid due-on-sale scrutiny.

You've increased your due-on-sale risk as per my points above. Roll of the dice if the loan is called ue, but the transaction technically has violated the mortgage due-on-sale clause.

Yes, Michigan law requires surplus to go to owner.

Interesting, the few instances of due on sale clause being executed that I could find involved transferring to single member LLC's. As you see it, what benefit is there to the bank of having an informal assumption under and LLC vs an individual?

None of the insurance companies I spoke with would allow such a configuration for insurance. Besides, how is that any less likely to invite scrutiny when there's still an additional person on there? Moreover, as long as the mortgagee and the loan number match as insured parties how would three entities over two be preferred by the lender in the event of a claim? Never mind that the former owner now has no claim to title.

Your points are not valid. Are you a bot? 

what are you worried about.. if the loan is called refi or pay it off simple as that.. that is the downside risk of sub to  and what any sub to buyer needs to understand and be ready to do in the fairly rare event that a loan gets called.. I had it happen twice we just stroke the check and pay it off thats after about 200 sub to's i did personally. 

Drew is a real person I dont think he is a bot / robot.