"Subject to" Seller Death

[Robert Pfenninger]

Howdy from Waco, Texas! If I get a seller to sell me their house "subject to" and the seller passes away while I am still making the payments on their behalf, what happens to the note? What if I have owner financed the property to someone else.

[Jay Hinrichs]

Originally posted by @Robert Pfenninger:

@Jay Hinrichs thanks for your input! I have not yet tried this strategy but definitely something I’d like to know the answer to as I run across a lot of deals that would suite this strategy. Just another tool in my toolbox.

that strategy has been taught forever by guru's and again great in theory.. but can be a total mess.. original seller still on the mortgage and especially in Texas were the lender can get a deficiency judgment against a defaulted borrower.. your  in title. and now you have given title or contract for deed to yet another party.. 

these deals are usually very skinny delta deals.. IE make a few hundred a month..  but what happens when your contract for deed stops paying and now you have to foreclose them out and of course they did 5 to 10k worth of damage's.. and your paying the original sellers underlying the whole time..  you can see how this would go..  so now you don't want to or have the funds to pay the sellers underlying and they don't have the money they were relying on you and now there home goes into foreclosure and their credit is trashed.. good possibily they come after you.

I rescued a small company in Oregon that had about 35 of these.. thinking hey 200 month on the delta and we make 7k a month great until it is not and their end buyers started defaulting.. the sellers started filing complaints at the state it got really ugly really quick.. 

so for me to do sub too that's just a short term get control flip the property.. or you have the wherewhital to refi.. but if you sold to another you cant refi you would have to stroke a check..   so that's the other side of the coin..