Is Subject 2 legal in Texas?

Question

I am actually looking to sell my current manufactured home as a subject 2.  Is this legal?  Can Mobile homeowners sell their house as a subject 2 like regular properties?  I am in the process of researching this subject.  But I can't find much information. If anyone can direct me in the right direction, I'd appreciate it.  I am clueless.

Account Closed · Answer

I bought a house Sub To for $186,000 plus $9,000 cash to the sellers in Kyle TX. I was into the transaction about $12,000 total ($9,000 to the sellers and $3000 in closing and carrying costs.) I sold it a couple of months later for $250,000 on a Wrap with $40,000 down. It turned out to be very profitable but a real pain.

I liked the large down payment I got up front but the property never cash flowed. Property taxes were too high. Then the property taxes went up and I started losing money every month. Then, the guy I bought the house from Sub To wanted to buy a new house and needed his loan paid off so he could qualify.

I didn't own the house anymore. Since I sold it on a Wrap, I couldn't refinance. The people I sold to on a Wrap weren't able to get financing and it dragged on for a couple of years until they got their credit straightened out.

Meanwhile the guy I bought the house from kept sending me expletive deleted text messages. ;-)

I had no control of the property under a Wrap. I won't be using a Wrap again.

Jerel Ehlert · Answer

Typically, investors BUY sub-2, then SELL on a wrap (has underlying loan) or owner financing (no underlying loan). I draft these all the time. Most REIs would never SELL sub-2. As an investor and lawyer, I would never, ever, ever do a land contract, CFD, or any form of L/O sell (L/O buy, sure). All of them are executory contracts and virtually impossible to comply with as the seller.

If the MH is attached to the land and registered as such, it's treated as any other piece of real property.

Hope this helps.

If the MH is attached to the land and registered as such, it's treated as any other piece of real property.

Hope this helps.

Account Closed · Answer

Yes you can sell using Sub To, Land Contract, Owner Financing - what is frowned upon and difficult to do correctly is Lease Option. Keep in mind if you have a mortgage on it, the loan might be called because of the Due on sale clause.

Melanie Thomas · Answer

Account Closed!

Shella Stephens · Answer

I will not be doing the sub 2 thanks for all the comments.

Todd Rasmussen · Answer

@Shella Stephens

As the borrower, you'll be in breach of contract with your lender. In the loan docs you pinkie swear not to do it. When we buy subject to, we have the seller sign a contract that they know by doing this they are breaching their contract with the lender.

Shella Stephens · Answer

Oh wow so much to learn.  Thank you very much, Mike, I appreciate your assistance.

Is Subject 2 legal in Texas?

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