Involved In Real Estate · Gilbert, AZ · Member since 2014 · 33 posts · 2 votes
I'm working on a Sub2 deal and have been reading tons of posts here on BP. I know I need a POA but would like an actual example of the specific language some of you use to address the immediate and longer term issues related to this kind of transaction. I would also like to have an example of the letter used to communicate with the existing insurance company. And finally, for those of you who do disclose to the lender (you know who you are) I would like an actual copy of the language used in your communication. I hope to realize the benefits of each of your experience, so I hope to get more than just "use what everyone else uses" because, obviously I wouldn't have needed to post this.
BP seems great for discussionsale about techniques used to structure win-win deals but too often leave out the details necessary to be able to put them in place.
I also know many of you have a tendency to get off track trying to prove who is more right, moral, legal etc. But for the sake of this thread we can hopefully style on topic.
I'm looking forward to all of your replies, questions, comments & suggestions.
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
11y
May be if you didn't bite the hand trying to feed you, you may have gotten more constructive comments. What planet are you from where they think being rude and insulting is rewarded?
Brandon, you can PM me.
Want a solution? Get a loan servicer involved to administer the Sub-2, they have the proper forms and communicate with lenders, insurance companies, title companies and other involved parties everyday. Problem solved!
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
11y
Welcome to BP, Tom
We don't avoid pointing out what may or may not be ethical or legal, it's not an off topic matter in any thread.
Nothing wrong with Sub-to deals, just disclose the issues.
As to your POA, you absolutely don't want to use a POA! That is guru junk. A POA puts you in a position as an agent of the seller, agency law applies, you don't want to be a buyer and the agent of the seller! You can be responsible for actions that you should have taken by a prudent person but failed to do. You certainly don't want to be in a position of informing a seller of all related information known to you nor do you want a secondary fiduciary responsibility of handling money. There are issues of implied consent that can go with a POA for you to act in the best interest of the borrower. Need to see an attorney!
You need to use a payoff request with the lender or an authorization to release mortgage information. All you need is the accounting at the time of settlement and you won't ever be negotiating any mortgage issue.
Insurance is taken care of the seller's insurance agent, there are several options, being listed as a co-insured, additional insured or a loss payee. The agent will have authorizations to direct loss proceeds.
Newbies generally don't act as prudently advised, to see an attorney because they think they are saving money, I understand that. But, using some agreement or guru documents without having a local attorney check them out can cost you more than the deal, you can be responsible for damages far beyond the value of some RE deal. It's also pretty much a one time cost since you can use your documents for years in future transactions.
Not getting local legal advice is penny wise and pound foolish.
Each state has different RE laws, no one contract is going to comply with all state requirements and RE is local, what is locally accepted governs. :)
Involved In Real Estate · Gilbert, AZ · Member since 2014 · 33 posts · 2 votes
11y
Bill,
I appreciate the reply and advice.
I think you may have misinterpreted what I meant by my mention of staying on track. I obviously have everything to gain by being informed of any potential legal issues, etc. I simply hoped to avoid the "back & forth" posturing by 2 or more fellow BP friends who just can't seem to let anyone else have the last word. (I can't be the only one who has seen a thread derailed by this)
Back to the use of a POA... I've seen some of the threads about sub2 deals where you've taken a different view to the use of a POA:
@Bill Gulley you got me thinking. I have several "sub2" deals in rental portfolio and need to make sure this is covered.
I have used limited POA when mortgage company issues escrow refund checks. Mortgage companies will not issue checks to your name and in this instance all I do is provide limited POA to my bank and there are no issues with deposits.
Specific use is fine. I'd suggest a specific POA to the deal, not a general matter but whatever they accept. :)
I'm not sure how the liability would be different. This is where the original question comes into play (and brings up others). What specific language would be used and in the previous example how would the liability be avoided? FYI, I don't intend to take any responses in any forum as legal advice but any advice will help me by knowing more than I knew before. Strictly used as a friend offering help to a friend : )
Involved In Real Estate · Gilbert, AZ · Member since 2014 · 33 posts · 2 votes
11y
P.S.
my apologies for the duplicate posts. I just learned how to tag someone. I still haven't found out how to delete / edit previous posts. The instructions I've found don't seem to work for me.
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
11y
Can't quote the format is screwed up.
If you don't want to take my advice, take that of some investor type or the better alternative see your attorney before you go throwing POAs around. :)
If you don't want to take my advice, take that of some investor type or the better alternative see your attorney before you go throwing POAs around. :)
Aren't you one of the self proclaimed "investor types" here on BP?
It's not that I don't want to take your advice, I'm simply trying to understand why you advised @rocky v. to use a POA in the sub2 example I provided. I thought it was a fair question.
If you don't want to take my advice, take that of some investor type or the better alternative see your attorney before you go throwing POAs around. :)
Aren't you one of the self proclaimed "investor types" here on BP?
It's not that I don't want to take your advice, I'm simply trying to understand why you advised @rocky v. to use a POA in the sub2 example I provided. I thought it was a fair question.
That was my short answer with the thread being messed up.
I thought I gave the reason, "Implied agency", "Implied Authority", "Agency" carries with it a fiduciary responsibility regardless of a duty being specific, it also includes aspects related to the specific authority, you have a legal obligation to serve the principal, this conflicts with your position as a buyer. a POA makes you an agent of the seller! Any POA!
If a bank accepted the POA and later sent you a notice, then you tried to cure some issue and ultimately failed to cure the matter, the seller could step in and cure it......ahhhh, but because the seller/borrower didn't receive the notice required by law, he doesn't have time to cure it. The law will say the principal received notice through his agent, but you tried to cure the matter. Now, the bank goes after the borrower and the principal has two different issues with you, one may be some default of allowing the matter to arise and the new claim, that you failed to exercise your duties as his agent. $$$$$$$ Lost.
Powers granted with a POA die with the principal, but other things can happen too, you're put in a position to act on his behalf, why would a buyer want to have a legal obligation to act in the best interests of a seller???? Just don't use a POA of any kind. :)
Aren't you one of the self proclaimed "investor types" here on BP?
It's not that I don't want to take your advice, I'm simply trying to understand why you advised @rocky v. to use a POA in the sub2 example I provided. I thought it was a fair question.
I thought I gave the reason, "Implied agency", "Implied Authority", "Agency" carries with it a fiduciary responsibility regardless of a duty being specific, it also includes aspects related to the specific authority, you have a legal obligation to serve the principal, this conflicts with your position as a buyer. a POA makes you an agent of the seller! Any POA!
If a bank accepted the POA and later sent you a notice, then you tried to cure some issue and ultimately failed to cure the matter, the seller could step in and cure it......ahhhh, but because the seller/borrower didn't receive the notice required by law, he doesn't have time to cure it. The law will say the principal received notice through his agent, but you tried to cure the matter. Now, the bank goes after the borrower and the principal has two different issues with you, one may be some default of allowing the matter to arise and the new claim, that you failed to exercise your duties as his agent. $$$$$$$ Lost.
Powers granted with a POA die with the principal, but other things can happen too, you're put in a position to act on his behalf, why would a buyer want to have a legal obligation to act in the best interests of a seller???? Just don't use a POA of any kind. :)
Bill Gulley
No, Bill there was never a mention of implied agency or implied authority in your advice to Rocky V. or in your responses to me.
I get it that your underlying general advise is to not use a POA, but you still haven't begun to explain why you DID advise Rocky V. to use a POA in the example he described.
I'm not sure why the question at hand is being treated as if it weren't being asked. Honestly, I wouldn't be going through this much trouble to get the answer if I really didn't want to know, but...I do! I assume with the experience you have there has to be at least a few good reasons to advise him to do the opposite of what you would ordinarily advise against. Come on Bill...don't keep the good stuff to your self!
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
11y
Afraid 're mistaken, I've never advised using a POA for loan verifications or information, if you think there was, please post it. What I said above was that my mortgage company used a POA for collections and deposits on contracts, do you have a loan servicing company? Probably not, in that I was representing the seller. I can see the confusion.
Joe seller has Jim the buyer, ABC Co. was a servicer, Bill owned ABC. Bill could buy the contract from Joe. :)
If you're a buyer, you don't want to be using a POA from a seller. Happy New Year! :)
Afraid 're mistaken, I've never advised using a POA for loan verifications or information, if you think there was, please post it. What I said above was that my mortgage company used a POA for collections and deposits on contracts, do you have a loan servicing company? Probably not, in that I was representing the seller. I can see the confusion.
Joe seller has Jim the buyer, ABC Co. was a servicer, Bill owned ABC. Bill could buy the contract from Joe. :)
If you're a buyer, you don't want to be using a POA from a seller. Happy New Year! :)
Bill, I posted it and you've replied to it when I posted it before, but here it is again:
@Bill Gulley you got me thinking. I have several "sub2" deals in rental portfolio and need to make sure this is covered.
I have used limited POA when mortgage company issues escrow refund checks. Mortgage companies will not issue checks to your name and in this instance all I do is provide limited POA to my bank and there are no issues with deposits.
Specific use is fine. I'd suggest a specific POA to the deal, not a general matter but whatever they accept. :)
Involved In Real Estate · Gilbert, AZ · Member since 2014 · 33 posts · 2 votes
11y
@Bill G.
I'll give you the benefit of the doubt that you must have been thinking of some other post you've been a part of. Prior to your most recent post in this thread, you never mentioned a mortgage company, collections, deposits on contracts, or servicing on behalf of the Seller in any comments in this thread or the thread in question with Rocky V. If you think there was, please post it ; )
The confusion is clearly on your side. (Feel free to re-read the previous posts to confirm)
As you can see in your response to Rocky V.'s mention of his use of a POA, you specifically approved of his use of a POA "SPECIFIC USE IS FINE" and the proceeded to advise him further on using a POA "I'd suggest a specific POA to the deal, not a general matter but whatever they accept. :)"
So, back to the big question...why did you advise @rocky v. to use a POA in the sub2 example I provided. In that situation, what language would you recommend in the POA? (since you did advise him to use it, after all)
Involved In Real Estate · Gilbert, AZ · Member since 2014 · 33 posts · 2 votes
11y
@Bill G.
Can you provide any constructive input to another one of the questions in my original post:
And finally, for those of you who do disclose to the lender (you know who you are) I would like an actual copy of the language used in your communication.
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
11y
What a smart _ _ _ (one). Clearly you aren't asking questions but sharp shooting, I made a mistake in saying it that way, I'll be sure to have you edit for me in the future.
In fact, I shouldn't have mentioned me using a SPOA, I should have realized there would be newbies that would think that would be fine, nope, shouldn't have said that. I should have been more clear about the circumstances.
Do not use a POA, specific or otherwise, that is my advice at this time, 2015, giving greater consideration the topic, the audience and your interests.
What a smart _ _ _ (one). Clearly you aren't asking questions but sharp shooting, I made a mistake in saying it that way, I'll be sure to have you edit for me in the future.
In fact, I shouldn't have mentioned me using a SPOA, I should have realized there would be newbies that would think that would be fine, nope, shouldn't have said that. I should have been more clear about the circumstances.
Do not use a POA, specific or otherwise, that is my advice at this time, 2015, giving greater consideration the topic, the audience and your interests.
The pearls are cast. :)
Bill, I am ashamed for you, for you seem to have none for yourself. I'll offer you an accurate recap to take away all of your excuses and expose your misplaced accusations.
I started this thread to simply ask for advice after reading many threads offering similar advice to use a POA with sub2 transactions. This thread didn't reference any particular post or person (impossible to claim that I'm "sharpshooting").
You voluntarily chose to respond and gave a contradictory opinion to one you publicly offered in a previous post here on BP.
I very politely responded and provided a copy of the previous post to offer clarification that in that specific post, you condoned the use of a POA and advised the specific type of POA to use. I then asked about your opinion related to only that post in which you advised the use of a POA. I mentioned your comments will be considered as "a friend helping a friend" as a genuine gesture to promote a fruitful mutually beneficial exchange between like minded people.
My next post was to apologize for accidentally inputting duplicate posts.
You responded like a spoiled teenager as though someone failed to kiss the ground you walked upon.
I clarified that I wasn't refusing to take your advice, but wanted to know why you gave different advice to a very similar situation by another person posting about a similar situation.
Your response was a petty attempt to distract, deceive and distort the topic of the thread by citing inaccurate references you suggested you previously offered and gave irrelevant examples that had nothing to do with the topic of the thread or the post in which you were quoted.
I responded by confirming my acknowledgement of your general position of NOT using a POA, but (again) asked what made you advise the other BP friend to use one. I virtually pleaded with you to give me your insight!
You pitifully tried to shift, duck & dodge the hard cold fact that you ever commented in favor of the use of a POA in a sub2. You even said I must be "mistaken" and asked me to post your comments to prove myself (even though, at this point we both know the post with your comments in question has already been put into this thread). Then you tried to interject yet ANOTHER irrelevant example, completely unrelated to any previous comments in posts from either of us.
My next post only contained the copy of the conversation between you and the other investor that clearly displayed you agreeing to and advising the use of a POA in a sub2. No more, no less.
I even followed up with another post trying to give you a graceful explanation for your misguided statements, citing your many contributions to threads here in BP. I asked the one and only question that I've been asking (and you've been avoiding).
I added another post asking you what language you use when disclosing the sub2 transaction to the lender.
Your final response started with vulgarity unprovoked by anything in this post and proceeded with a rant befitting a toddler that had his favorite candy taken away.
My advice to you is to restrict your activities to reading the posts and avoid commenting on them unless you are willing to conduct an honest dialogue in a meaningful way. Unfortunately in this case you proved incapable of doing so.
Real Estate Broker · Northwest Indiana, IN · Member since 2011 · 2k+ posts · 2k+ votes
11y
I read through this thread and the other thread. I have to say @Tom Plyler the questions you have asked have actually been answered in a couple different ways more than once. Let's put the pitchforks down and I will go back over the questions and answers so you can get your piece of mind. @Bill Gulley knows what he is talking about and did address your inquiries. It seems that you may not have recognized the answers.
First and foremost. POA's are a bad idea. The Sub2 POA is a misuse of the instrument. There are 3 types of POA - durable, general and specific. POA's need to conform to state statue. So asking the masses about the language in POA will not likely produce a POA acceptable in your state (the state of the subject property) unless the state is the same.
The nutshell misunderstanding here is what a POA is for and what it does. In advance, let me just say I can imagine rebuttals along the lines of "I have used these all the time" or something to that nature. All I will say to that is, congrats that you have not been caught yet. POA abuse in the mortgage industry is widely known and is addressed in any mortgage fraud presentation or discussion that one might attend. The utility of a POA is not legally in line with the way it is being sought after for a Sub2 transaction. Bill said that.
The primary rejection from Bill said this:
"A POA puts you in a position as an agent of the seller, agency law applies, you don't want to be a buyer and the agent of the seller! You can be responsible for actions that you should have taken by a prudent person but failed to do. You certainly don't want to be in a position of informing a seller of all related information known to you nor do you want a secondary fiduciary responsibility of handling money. There are issues of implied consent that can go with a POA for you to act in the best interest of the borrower."
That is where he specifically told you, using the POA creates a liability on you where you are acting as an agent. As such, agency laws will apply. I don't think you recognized it as such, as you mention back to Bill that he never said such things but he did. As a buyer, you are an 'interested' third party. A POA is supposed to go to an 'uninterested' third party. Like an attorney. The uninterested part there is to keep things fair. Since giving you power can be abused against the best interest of the person conveying power. I think that sort of makes sense. That is also the exact application that Sub2 folks hope for, the stark opposite of what it is legally supposed to be. He continues to tell you of certain obligations you would have, that as a Buyer would not be in your best interest to carry out. Failing to disclose and failing to act in the Borrower's best interest while acting in your own best interest can get you in super hot water with the law. Moral of the story, it is best to just not go there.
The conversation with Rocky is being taken out of context and context matters. The culprit is probably a misunderstanding of what POA's can do and the different forms of POA. In the Rocky conversation the specific purpose is to be able to deposit the check in his bank. So the POA serves sort of as a substitute for endorsement. ("Pay to the Order Of Rocky"). As far as that goes, I would not read too much further into it, it was a limited idea. It was not meant to be all encompassing. Essentially, "hey, if your bank will take a POA and not require further endorsements, so be it" type thing. Bill goes further to say, in that setting you would really want a Specific POA (one of the three types) and the reason is so you don't not take on unwarranted liability through a General or Durable (though he specifically address General not Durable). With in the confines of the Rocky inquiry, essentially how do I cash a check/make a deposit of a check not addressed to me, this entire conversation is fully enclosed. It need not be applicable to the universe of Sub2. While it may seem like it applies because a POA is being used, it does not.
The next interaction Bill does add some additional insight as to the inherent liability that is created by having a POA. The in power party is considered the principal. However, the principal can revoke the power at any time. So, I can give you a POA today and decide tomorrow I will take care of what the POA is for myself. What got pointed out is that two liabilities onto the in powered party would then exist. (1) the default or failure to act to cure the issue in and of itself (2) the claim that due to #1 you failed in your duties expressly given through the POA itself. Moral of the story was you lose dollars. Best advice, just don't go there.
The ever present misunderstanding of the utility of a POA is not understanding the in powered party - the POA ATTORNEY IN FACT HAS TO ACT IN THE INTEREST OF THE PARTY GIVING POWER.....NOT THEIR OWN. So, when you hold a POA and you put your interests ahead/in front of the party who granted you power, you created a problem that essentially you did not need to create in the first place. You created that liability onto yourself by using the POA and you didn't need to use the POA, it is a misuse from misunderstanding. It is not in your best interest to have a POA. Again, best advice, don't go there.
It seems after all that dialog, Tom, you were intent on trying to treat both scenarios as the same. Not because they are the same, but because you thought they are the same. They are not the same. In that, instead of restating what seemed to be misunderstood it became easier to simply say, "Don't use any POA, anywhere." Frankly, that is the same approach that I would have taken too. In technical matters sometimes the detailed uphill battle of just getting the inquirer to the point where they can start to grasp the matter is a journey that doesn't make sense to voyage sometimes. (too involved) From the OP forward, you don't understand what a POA is or does legitimately and legally. The easy way to help you was mentioned numerous, literately numerous times. Just don't use a POA, it is not in your best interest. When you didn't understand why, it was explained but you didn't fully recognize or grasp the explanation delivered. Honestly, that is not Bill's fault. He tried multiple times from multiple angles to help you understand. Sometimes the points just get missed. The posting issue in the thread didn't seem to help.
Perhaps one major influence here was coming to the forum with the idea that you described as "...I know I need a POA but would like an actual example of the specific language some of you use to address the immediate and longer term issues related to this kind of transaction." I am hoping you can see, you actually didn't know you needed one because not only do you not need one, you should not use one.
I won't attempt to continue to explain any of this from different vantage points or in different manners as I think that all of this is pretty clear. That includes Bill's commentary and my recap of the same. If you are not liking the answer, then you are not looking for an answer to your inquiry as it would suggest you have a preconceived notion of the answer already in mind. That's cool if you do or don't. That is your prerogative. However, in regards to throwing stones in the very last post, that seems fairly unwarranted. Advice was given directly on your topic and in your best interest. There is not much more you could really ask for here.
Involved In Real Estate · Gilbert, AZ · Member since 2014 · 33 posts · 2 votes
11y
@Dion DePaoli
Cooler heads prevail : )
I do try very hard to keep an open mind in order to try to understand another point of view or a different concept. I think the problem Bill and I were having was that we were discussing two different topics simultaneously. Each of us were making the assumption that the other one understood where & why the other person was coming from, but I don't think that actually was the case.
All I was trying to find out from Bill, in the Rocky example was why he seemed to agree with the use of POA in order to cash the check. Nothing more, nothing less. I whole heartedly get it that he doesn't recommend the use of POA's in a sub2 deal. I even understand the agency issues created by the use of a POA. If I inadvertently took that conversation out of context, I didn't hear anything from Bill that put it into perspective. Wouldn't it have been much better to simply say how he would have handled cashing the check as described by Rocky? Or if that is one of the only exceptions to the rule, say so. Either way, In their thread it sounds like Rocky used a POA to be able to receive escrow overages. It also seemed as though Bill agreed in that situation. I was only asking him how that specific example differed from his overall recommendation against using a POA. I still don't understand how this scenario should be addressed differently, if at all. If he addressed that in any of his examples that I perceived to be irrelevant to how the Rocky's of the world should or shouldn't be cashinges the check, I'll be the first to admit it.
The paragraph that began with "The cronversation with Rocky is being taken out of context and context matters." comes closer, in my opinion, to address the question than anything Bill said throughout all of his posts.
So, after all that's been said, do you, Bill or anyone else have an opinion as to whether the use of a POA in that scenario is an acceptable way to go? If so, what would be an example of appropriate language to be used in the POA? If not, what would be a better alternative?
I'mean back where I started. Not looking for any conflicts, just looking for answers.
I am not here to speak for Bill, he is quite capable of that on his own. Bill and myself have been involved in many threads on many topics together and I have an understanding of the matters he tends to point out and the approach he uses.
A correction was made with a little bit of detail, which you later condemned, where Bill offered up he should have worded his response in the Rocky thread differently. That is all that needs to be said there.
As far as using the a POA for Rocky's purpose from my own view. I do not agree with a POA. In fact, for the same reasons that have been pointed out here that POA and treatment of the escrow overages can work against your interest. This stems from the fiduciary responsibility that a in powered agent has.
In the Rocky example, as in most other Sub2 settings, the promoter of the Sub2 is seeking a POA to circumvent, on purpose or by ignorance, the duties that go with being the Attorney In Fact.
In short we have two general concepts:
1. Keeping the principal informed in full - the POA by Sub2 is typically sought to act autonomously and not be 'bothered by' or have to 'report to' the principal. That is not what POAs are for.
2. Profit by the ATF (Attorney In Fact) is to be fully disclosed and detailed - I can only speculate on this, but I do not see too many promoters of Sub2 overly disclosing their profit to the principal. (Skimming?) Profits and other benefits gained not disclosed to the principal are in direct contrast to the purpose and use of a POA.
So to read into the utility implied by Rocky, his purpose of the POA is to act autonomously. He has 15 assets that he needs to cash checks for when they come. The underlying reason Rocky wants to use the POA seems to fall under the guise of his own benefit, to more readily and easily access those funds. By doing so, we can presume disclosure require is then missed as well. So poof, we have several issues that arise.
To further discuss the utility implied by Rocky's example let's just think about how the entire transaction occurs. A Borrower (the underlying owner) has a mortgage with impounds. Somewhere mid year a Sub2 promoter approaches the Borrower for the transaction and the Borrower follows the lead and participates in the transaction. If the promoter fails to fully capitalize that impound account, then funds are being held explicitly for the Borrower. If those overage funds are not properly accounted for and delivered back to the Borrower then we have an issue. Perhaps a claim of tortious interference related possessory rights?
From a different angle and applicable to a broad utility of POA in Sub2 is the accusation of fraud can be a burden to defend as opposed to be being proven. That is, since the POA conveys fiduciary responsibility the accusation of fraud can be made and the burden of proving it was not fraud lies solely on the Attorney In Fact or promoter, not the accuser. So, if the promoter believes those funds were transferred or conveyed to them under the innate misunderstanding of how the court will treat the transaction, then they likely will not act like a typical ATF under fiduciary duty would act and the outcome (in speculation) is likely they treat the funds as theirs. The likely outcome in that setting is the court sees it as defrauding the Borrower.
Now, just to touch on the notion that disclosing the gains made would make this all better. When the gain is disclosed and the ATF stands to benefit through their position, they are in a contractually different relationship than what is imposed by a POA. (That has been said already) As such, different complaints and remedies of the Borrower may arise which can cause all sorts of issues with the tangled web of POA in Sub2. The easiest example is the entire transaction is void and now the promoter is on the hook for damages to the underlying Borrower and perhaps the new Borrower who they sell the property to. For the record, a renter/tenant could be asked to join a complaint or make one on their own depending on details. Bam, getting hit from all angles.
To be very clear in my stance and opinion. POA's are not to be used in any setting related to a Sub2. The odds of not doing it all correctly from the start and innately in the structure make POAs in Sub2 just a bad idea. Again, most of the time the presence of the POA is in direct contrast with the legal purpose and use of a POA. You do not get to act autonomously and for your own benefit.
Let me further add, I am not champion of the Sub2 epidemic sweeping street level REI. I think in general Sub2 is a horrible proposition. There are some, very few, situations where a Sub2 makes sense in today's market. These Sub2 constructs are the literal house of cards waiting to come crashing down around many people's heads. Most of the Sub2 practitioners use Sub2 as an off-set to lack of capital, a whole issue onto itself. At the least, the those who are not well versed in RE and many times other legal matters do not understand nor want to understand just how dangerous these constructs can be. The lure of quick, easy and risk-less return is far to enticing to make time to comprehend just exactly what is being played with. You are one 'Victimized Borrower' or one 'Something to Prove Attorney' away from a huge mess. While looking around and saying "everyone else is doing it" or "I have attorney so I am safe" seem to overlook the all the cases where folks were either put in jail or ordered to pay huge amounts of fines and restitution.
So in my view I would tell you, do not do either POA or Sub2 let along combine them.
I've been following this thread with great interest. I'm also very curious to learn about Sub2 and so am in the process of gathering as much info as possible. I have indeed heard that a POA is needed for a Sub2 deal. I think it's pretty clear that Bill and Dion's position is that POA's are not only NOT needed, but that they could also cause harm. I think they've made a pretty interesting argument as to why that is.
Being that I'm still at the beginning stages of learning about Sub2s, can we back up a bit for me and explain what are the various issues that we trying to resolve by getting a POA? Escrow overages was one, but what other issues are there? Then perhaps, we can talk about alternative methods to solving those issues without a POA.
Involved In Real Estate · Gilbert, AZ · Member since 2014 · 33 posts · 2 votes
11y
@Brandon G.
Is it just me or do these guys have the tendency to point out ever thing that can go wrong without ever offering any direct answers or alternative solutions whatsoever?
Emphasis on NO SOLUTIONS!!
Their assumptions that almost nothing has ever been disclosed or agreed by contract with the original borrower points out only the worst case scenario and suggests that everyone here but themselves are slimy, lowlife bloodsuckers. Can we say narcissistic?
I still can't seem to get the most simple form of an answer to a basic question. They seem to suck the oxygen from the room & address issues not directly relevant.
From everything we read here on BP, there are definitely issues that need to be addressed after the sale & they don't necessarily involve fraud by the investor. Like you, I want to know more about what issues to prepare for and how to address them before they happen.
Maybe if you post a similar thread you might get more help? If so, please let me know.
They gave their reasons why they don't think it's a good idea, so don't expect them to give you language for something that they believe is ill advised. By the way, those two guys know more about notes and mortgages than any 20 guys you'll ever gather in one room. If you want the specific language for a POA anyway, ask the guys you say are advocating it.
Involved In Real Estate · Gilbert, AZ · Member since 2014 · 33 posts · 2 votes
11y
@Wayne Brooks
I credit each of them for all of the knowledge they have. My criticism falls with the lack of an alternative solution. I'm not looking for someone to agree with me on anything. Quite the opposite. As my thread started and continues to the point where I feel like I'm beating the dead horse, I'm looking for solutions!
No solutions by those who have more knowledge than any 20 others equals meaningless knowledge.
No POA...OK, then what?
One of these guys (Bill) openly approves of sub2 deals with disclosure but not using a POA and the other, Dion openly disapproves of either of them. Both perspectives are great...providing they offer more than what they reject. It's too easy to say "the problem with doink it that way is..."
Contractor · Garland, TX · Member since 2014 · 186 posts · 9 votes
11y
@Tom Plyler I think @Wayne Brooks is correct. I've been following @Bill Gulley posts for awhile and they straight up know their stuff. Dion is not a proponent of Sub2 in general, so I would not expect that he would offer an alternative to solution to using a POA here.
I think if we just keep at it, we will get the information we're looking for it just takes time and patience. I think at this point others are reluctant to chime in with differing opinions simply because they are not prepared to debate the issue with either Bill or Dion. I think that speaks to Bill and Dion's status here as two dude's who really know their stuff.
Maybe give this thread some time to die down a bit and get buried then repost phrasing your question a little differently. If you don't then I probably will. Or PM someone who seems to know Sub2 very well. If you need the info quicker, talk to an attorney in your area who has a reputation with Sub2's. It's important that they have a good reputation for Sub2 because the first RE lawyer I talked to didn't know the difference between formal assumption and sub2. Another one I talked to tried to sell me a course. Needless to say it's tough when you're just getting started! Whatever you do, please keep me updated, and I'll do the same.
Real Estate Broker · Northwest Indiana, IN · Member since 2011 · 2k+ posts · 2k+ votes
11y
Tom,
This is both interesting and a little tiring. A solution to what exactly?
You have not poised a specific example illustrating a need for a solution other than ask for text to a POA and contents of a letter to write to insurance companies, so how is anyone supposed to comment on one?
Numerous times aside from saying POAs in Sub2 are bad I told you POAs need to follow state statue. So even if there was something to give, it would be impossible to give without you providing some information to actually work with like the relevant state of the subject property.
I said don't use POAs, they are not good for you. The best solution to not get poisoned is don't eat poisoned food. I explained what you may have thought was a cookie is actually poison. I explained how said poison affects your system to an extent that I think adequately explains many of the misconceptions (at least the main one - acting autonomously). Some may look at that as a path to understand which cookie to actually eat, others will just be mad they didn't get a cookie.
You are not understanding. In some instances, it almost seems like you are also not reading what was wrote. (That is the tiring part) There is no language to give for a POA in a Sub2 since you should not use a POA in a Sub2. Your hell bent focus is blinding you on the POA information.
You have not explained what YOU are trying to accomplish with the POA, so why are we supposed to be mind readers and alternative solutions providers?
Additionally, I reserve my own right to omit or withhold certain details to things which I do not think furthers the best interest of not just the inquirer but all the readers. What I would like to think I shared with you, which you are discarding relatively obnoxiously, is the manner of thought, the relationship of ideas in the applications you were trying to carry out. That whole, give a man a fish or teach him to fish stuff, you know. It seems, you just want the fish. (or the cookie, maybe both) Problem is, the fish is Moby Dick and he doesn't exit but in a fictitious book.
Let's divert from the pain of POA for a moment and address your insurance inquiry. What are you trying to do with the insurance?
See, that is a loaded question from me. I have a good idea of what you think you are doing and I also know by the question you do not fully understanding what you are talking about. As such, it is better to wait for you to be more articulate as opposed to spend another 6 posts on all the things you should not do with insurance because you didn't create a real question to work with. Why? Because there are no simple answers in any of this. Stop looking for them. There many moving pieces and many things to consider and frankly attempting to address all of those is impossible. If it wasn't, there would only be one thread on this matter. That is obviously not the case.
I come to this site and share what I know in pretty decent detail pretty often. I enjoy solving problems and helping correct misunderstandings so folks can continue their path in matters to which I comment. I can just easily not and only drink some beer and watch some football. If that makes me a narcissistic, so be it. Others seem to disagree with your view.
Now, when you are ready to provide something to work with, like an example with some details perhaps even with some application of what has been stated thus far in the thread and quite trying to call people names, then we can talk about "alternatives". Anything prior to that honestly just sounds a bit whinny.
First, you should never trust without verifying....period. If it can't be backed up with hard data (facts), then is more opinion more than fact.
Second, no one on this site or any other real estate site is completely versed in the real estate laws of all 50 states. If I tell you something as fact, I will be glad to back it up with facts...otherwise, it's just my opinion based solely on my experiences in a specific state. I caution you to use many sources of information to verify or dispute what you're being told here and on other sites you explore in your thirst for knowledge.
The information here is general in nature for the reasons above. I spent the first 6 or 7 years of my investing career researching until 2am four to six days a week. I worked closely with several local real estate attorneys (including many lunches with them) and spent an ample amount of money to get information based on their legal experiences. BP is a great site, but don't depend solely on BP or any other site to gain all the requisite knowledge necessary to get your business going or to keep you out of legal trouble.
Think of this way. States define their criminal laws with what most would say is unambiguous statutory language, including definitions of acts that are unlawful. Yet, the criminal courts are full of attorneys who differ on the meaning of a single word in a specific statute. My point is this. If the experts can't agree on something clearly defined in law, then it's probably a lost cause trying to get those of us without a jurisprudence degree to agree. BP is only one arrow in your arsenal of knowledge...use it wisely and keep other arrows at the ready.
Involved In Real Estate · Gilbert, AZ · Member since 2014 · 33 posts · 2 votes
11y
@Brandon G.
I agree that eventually there will be someone out there more interested in helping than arguing for the sake of satisfying their own superiority complex. I agree these two know their stuff but there's no mistake they waste too much of it by manipulation.
I've also read many other threads where these same people hijacked a thread that started with relatively straight forward questions and turned them into a pointless, irrelevant (to the original intent of the thread) debate. That's actually why I included this in my original post before they (or anyone) responded:
"BP seems great for discussions about techniques used to structure win-win deals but too often leave out the details necessary to be able to put them in place.
I also know many of you have a tendency to get off track trying to prove who is more right, moral, legal etc. But for the sake of this thread we can hopefully stay on topic."
If I hear of anything that could be of help I'll link you to it. Sorry you (or I) couldn't actually benefit from much in this thread.
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
11y
May be if you didn't bite the hand trying to feed you, you may have gotten more constructive comments. What planet are you from where they think being rude and insulting is rewarded?
Brandon, you can PM me.
Want a solution? Get a loan servicer involved to administer the Sub-2, they have the proper forms and communicate with lenders, insurance companies, title companies and other involved parties everyday. Problem solved!