Subject To Strategy Question

[Daniel Rutherford]

I had a question for anyone who has done Subject To deals or is fairly knowledgeable on them. Once you take the title and pay on the existing mortgage, how would you go about changing any escrow terms? Specifically, the homeowners insurance policy would need to be in my name as the deed holder, but that is part of the existing PITI payment. Since the mortgage wouldn’t be in my name, how would I be permitted to change the terms? Would the bank allow a policy that is in a different name than what’s on the mortgage? This is all of course a separate discussion from any Due on Sale clause issues. I’m just curious how anyone has dealt with this in their own dealings. Thanks!

[Mitch Messer]

Hi @Daniel Rutherford. I know of two ways to address this:

1. Keep the existing policy that's in the borrower's name, and get a new (landlord) policy with your title-holding entity as the insured party.
2. Get a new (landlord) policy with your title-holding entity as the insured party and the borrower as an additional insured party.

We've done both. Option 2 is cheaper (one premium instead of two). Just make sure your insurance carrier can get it done right.

In either case, you will need to have solid paperwork signed at closing to ensure you have the ability to cash an insurance check if you ever file a claim, namely a limited power-of-attorney from the borrower to your title-holding entity.