Kernersville, NC · Member since 2013 · 2 posts · 0 votes
Hi all,
There is a seller wanting to sell his house because he's retiring. He paid 90k, still owe 75k and willing to sell at 80k with assuming his current loan.
This is my first time doing this, after hearing the podcast few weeks back on assuming loans.
my question
1. how do I approach seller bank on this issue?
2. how do I title the property
3. who pays for insurance and how to let the loaning bank know?
these might seem simple but I want to make it right the first time, appreciate in advance.
Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
12y
You don't approach the lender about taking over the seller's payments. The seller's sale to you allows the lender to call the loan due in full. It's called the due on sale clause and it's in pretty much every mortgage. This is always a risk when you take over payments. The lender doesn't not have to accept payments from a new owner and has the right to call the loan due in full. If you can handle the risk, get an authorization to release information from the borrower and a specific power of attorney so you can call the lender and get pay off info when you need it. The lender will not speak to you or deal with you without written permission from the borrower.
You take title however you take title to investment property. In your name, your corp, your LLC, your trust. It's your choice.
The best way I've found for insurance is to buy a new policy with you named as first insured, seller/borrower named as additional insured and lender named as mortgagee. Again, this may or may not make the lender aware the borrower has sold the property and may trigger their right to call the loan due in full. You'll have to check if the borrower is paying insurance through an escrow account with the lender.
Don't get a deed from the owner without the assistance a closing attorney or title company. You need someone to properly prepare the deed and you need to look at a title report to understand what you are taking over.
Don't do this deal unless you have the ability to pay off the loan with cash or refinance if the lender should call it due. Have a back up plan.
Real Estate Consultant · Lancaster, CA · Member since 2014 · 423 posts · 223 votes
12y
There's an easier way to do this transaction. Have the seller put title of the property into a Land Trust, with him as the beneficiary and trustee. Have him record a Trustee's Deed with the County. No need to inform the mortgage company. Next, have the seller sell you the beneficial interest of the Land Trust for $80K. No need to record another deed because the title is still in the name of the Land Trust. You become the Trustee and hte beneficiary of the Land Trust.
I do agree with having the owner sign a Power of Attorney specifically for this property giving you, as the Land Trust Trustee, power and authority to conduct any and all business as it relates to this property which belongs to Land Trust, but whose loan is guaranteed by the original owner. No one sees the actual Land Trust (100% private). All they know is that the original owner transferred title of the property to his Land Trust, which now owns the property.
Read up about Land Trusts for real estate investments and talk to an real estate attorney. Good luck.
Dallas, TX · Member since 2013 · 4k+ posts · 744 votes
12y
It is not a good idea to try these guru tactics because it could back fire on the seller if the lender asked about the trust believe me, the lender or anyone can trace everything right back to the seller. A land trust is not 100% private like most Gurus teach.
There is a seller wanting to sell his house because he's retiring. He paid 90k, still owe 75k and willing to sell at 80k with assuming his current loan.
This is my first time doing this, after hearing the podcast few weeks back on assuming loans.
my question
1. how do I approach seller bank on this issue?
2. how do I title the property
3. who pays for insurance and how to let the loaning bank know?
these might seem simple but I want to make it right the first time, appreciate in advance.
Is the loan an FHA or VA Loan? If so then it is assumable, and you would just need to contact the servicer to request an assumption package for the loan. Otherwise, as mentioned before, conventional loans contain a due on sale clause which is USUALLY called at the time of the sale. There are certain scenarios where a bank will not call the loan and allow it to be assumed, but they are relatively uncommon.