Purchasing the Deed Subject to and the Due on Sale Clause

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Purchasing the Deed Subject to and the Due on Sale Clause

Howard C
Brooklyn, NY · Member since 2010 · 24 posts · 4 votes

I have come to an agreement with the seller who is looking to sell his deed to me, subject to the current mortgage he has with the lender. He is doing a quit-claim to me for a 25K fee. My concern has to with the "due on sale" clause that exists in his mortgage, and most, in general. Has anybody heard or actually experienced the lender calling the note due and actually exercising this clause. If so, how much time did the bank give you to pay the note off before commencing foreclosure?

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Account Closed
Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
12y

This subject has been discussed here many, many times. Search on subject to or due on sale and you'll could be reading till this summer. Loans being called is rare, but it does happen.

I suggest that you do not get a quit claim deed. Use whatever deed normally conveys interest in real property for your area. Get a title report so you know what's going on. Make sure you get an authorization to release information signed by the borrower(s) and all the loan info so you can communicate with the lender in the future if you need to.

What state and is the borrower in foreclosure?

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  • Account Closed
    Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
    12y

    This subject has been discussed here many, many times. Search on subject to or due on sale and you'll could be reading till this summer. Loans being called is rare, but it does happen.

    I suggest that you do not get a quit claim deed. Use whatever deed normally conveys interest in real property for your area. Get a title report so you know what's going on. Make sure you get an authorization to release information signed by the borrower(s) and all the loan info so you can communicate with the lender in the future if you need to.

    What state and is the borrower in foreclosure?

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  • Jon Holdman
    Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
    12y

    These deals are most commonly done with little cash to the seller. You're taking a big risk to have a lot of cash tied up in the deal.

    I agree with @Account Closed - no quit claim deeds! Absolutely not! Go to a title company and do this properly with a warranty deed, a title search and title insurance.

    By the way, you're purchasing the property. A deed is just a document to formalize the transaction.

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  • Howard C
    OP
    Brooklyn, NY · Member since 2010 · 24 posts · 4 votes
    12y

    The question becomes, even if the lender calls the note due, how much time do I have to refinance or sell the property as an exit point? Or is it usually up to negotiation when that does happen? The seller says the only way he will transfer the deed is through a quit-claim, which I am OK with if the title search comes back clean(of course except for the existing mortgage) and if the title company is willing to insure it.

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    12y

    @Howard C

    @Account Closed

    @Jon Holdman

    Harold depends on what state you are in.. In some states the QCD will not be insurable going forward in other states the QCD suffice's. Its always best to get title insurance as stated above.

    To answer your questions though. As Marie pointed out very few lenders in this day an age realize a property has transferred unless you specifically tell them. And they very rarely invoke their alienation clause in the Deed of trust or Mortgage. However depending on the state if you take title and a lender figures it out and they invoke the power of sale you will have between 90 days ( Georgia MS ) to 5 years ( NY FLA ) and every where in between.

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  • Jon Holdman
    Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
    12y

    Here's a recent discussion: Due on sale snap poll

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  • Account Closed
    Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
    12y
    Originally posted by @Howard C:
    The question becomes, even if the lender calls the note due, how much time do I have to refinance or sell the property as an exit point? Or is it usually up to negotiation when that does happen? The seller says the only way he will transfer the deed is through a quit-claim, which I am OK with if the title search comes back clean(of course except for the existing mortgage) and if the title company is willing to insure it.

    Really depends where you are. Here in CA you would have about 4 months to payoff or refinance if the loan were called due. But you may run into a problem if you don't an authorization to communicate with the lender. Most won't talk to you if you are not the borrower. Ask me how I know.

    Title companies here won't insure a quit claim, and they are pretty stringent these days about only using approved notaries. IMO, a seller that will only sign a quit claim is a red flag. Likely there is a title or lien issue. Get that title report and let us know what you find.

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    12y

    @Account Closed

    Marie we had ( have ) a bunch of old straggler lots in Lake county CA. probably 150 to 200 of them.. a few years back one of the land guys ( you know buy a lot for 50 down 50 a month) searched us out. I sold them 75 of them and just quit claimed them.. Not sure if they were ever able to do anything with them. Or if they just intern sold them via quit claims.

    Finger prints for Notaries started in the mid 90's after some pretty high level fraud cases. ( of which I had some first hand knowledge)... On the flip side when I am selling my FLA properties I need TWO witness and a NOTORAY for the Warrantee ( Grant ) deed to transfer title. The first closing we had a few years ago I thought they were just kidding about the witness's and I sent the deeds back with just a notary and they would not record them. I just did a few transactions this week in the Carolinas and they had the same witness requirements.

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  • Account Closed
    Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
    12y
    Originally posted by @Jay Hinrichs:
    @K. Marie Poe

    Marie we had ( have ) a bunch of old straggler lots in Lake county CA. probably 150 to 200 of them.. a few years back one of the land guys ( you know buy a lot for 50 down 50 a month) searched us out. I sold them 75 of them and just quit claimed them.. Not sure if they were ever able to do anything with them. Or if they just intern sold them via quit claims.

    I am aware of a few of those companies, including the ones in California City and Lake Elsinore. I once sold a lot to them. Those companies do their own escrows and don't insure title. Most re-sell with quit claims. They make money on the paper. The CA City guys built a campground with mini-golf and a little hotel and a stable in the middle of nowhere 20 years ago. It's all for show for the bus tours. Nothing happens there. They sell 2K lots for $30K all day long, with a small down and and they carry back the rest. They don't pay property taxes on the ones they don't sell and then buy them back again at tax sale when the bids get dropped. They just keep reselling the lots over and over. It's a game. A boring one, if you ask me.

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    12y

    @Account Closed

    the land bizz model has been going on like this since the 1920's there are over 1 million lots of record in Riverside and San Berdo counties each that were platted back in the day and when you fly over the area you can see roads going to no where with the occasional mobile home stuck out in the middle so of no where. Then Boise Casacade came in and built 27 communities mainly from Fresno north they would put a lake in a golf course. Pine mtn lake has an airstrip then sell lots off by the hundreds.

    These basically unbuildable lots make up the bulk of most California tax sales.

    And of course Florida did it also.. Lehigh Acres and Coral Gables there are 100's of thousands of platted lots in these areas that have been bought sold lost at tax sale run up in value crashed etc etc... Arizona has a bunch as well. Texas Montana in all the big sky country states.

    Then you had the " R ranch's" a time share if you will those are somewhat like what you described.. Jeff Dennis developed those and made millions. But the paper on those is much like Time Share paper very soft lots of defaults.

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