Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votes
We haven't seen that many due on sale clauses being enforced by lenders over the past decade or so. At the same time, we're seeing some gurus selling strategies like subto as if there is no risk of triggering a DOSC. More and more investors are looking to assume low-interest loans rather than deal with reduced cashflow thanks to today's interest rates. It was before my time, but my understanding is that triggering a DOSC was more common in the 80's during a similar rising interest rate environment like we find ourselves in now. Lenders are probably more likely to enforce their right to call the loan if they feel their security is at risk in the hands of an unvetted buyer, or they believe they can make more money if the buyer applies for a new loan. It seems like it is becoming good business for lenders to start enforcing (they may actually also benefit by getting these 2-3% interest loans off their books). Are we about to see an uptick in due on sale clause enforcement? Curious to hear what some lenders and folks who have been around a minute think about this...
Investor · Tempe, AZ · Member since 2016 · 20 posts · 50 votes
3y
We have had the due on sale clause called 4 times this month... but knowing your way around it is crucial. Either A: revert to a lease option with the option price being the mortgage balance when the option is executed... or B: Use an executory contract instead of SubTo. Land Contract. Contract for Deed. Agreement for Sale etc. I talk about this on my youtube channel.
Rental Property Investor · Somewhere over the Rainbow · Member since 2021 · 1k+ posts · 1k+ votes
2y
I am surprised these lending institutions don't regularly run algorithms showing which loans have been assumed
Seems like an relatively easy thing to do to regulate and in a way minimize risk - maybe have more defaults but still maximize their loans by forcing compliance
Pardon my ignorance, what happens if the seller stops making their mortgage payments? Suggestions on learning more about contract for deed? TIA
No problem. The whole point of this post is to answer questions like yours. Good question by the way.
In a Subject To, it isn't the seller making the payments. The seller is out of the picture.
The real question is what happens if the buyer stops making the payments: The property goes to foreclosure and the seller's credit gets trashed. The seller then can sue YOU!. You can also be referred to the State Attorney General for fraud. Don't miss any payments.
Your question: "Suggestions on learning more about contract for deed? TIA" \
That is an Executory Contract
Executory Contracts by definition violate the same Due on Sale that just got called
Here is the actual wording of the Due on sale clause
18. Transfer of the Property or a Beneficial Interest in Borrower. As used in this Section 18, "Interest in the Property" means any legal or beneficial interest in the Property, including, but not limited to, those beneficial interests transferred in a bond for deed, contract for deed, installment sales contract or escrow agreement, the intent of which is the transfer of title by Borrower at a future date to purchaser.
Thanks, I got the impression there was a difference between contract for deed and subject to.
There is a big difference between them.
The key element is :"the intent of which is the transfer of title" in law, the intent can be the determining factor, it doesn't have to actually occur or be done in a specific manner.
You can speed because you have your foot down too hard on the pedal or you can speed because you are going down hill. You're still speeding.
Thank you for all your insight.
So I’m on of Pace Morbys “students” I didn’t pay I just followed around the videos and Facebook group and now I’m quite worried about this deal that I’m committed to.
I have a deal that I am supposed to close on in 2 days.
Here’s what’s happening, seems like a subto student picked up a sfh for 4K and is paying the owners mortgage.
he then decided he would not continue to do so, and listed it as “take over payments” on Craigslist, for 17k. (His profit is in the entry fee) He owes 3 months missed payments and I offered to catch up the arrears, bring the loan current, and take ownership.
I myself own and operate 13 units since 2017, and I’d say I’m a good operator.
Anyways, the issue is that now the bank/owner has been notified of non payment, and while the seller is telling me everything’s fine between him and the person on the note and all, I know that the bank has eyes on this account now.
I'm sure even with a reinstatement (closing attny is working to get that), that this is not looking good for me once I become the beneficiary in the trust (the contract is for land trust beneficiary interest) of which my LLC would be 100% owner.
I’m sure you all can see the issues that can arise here..the DoS clause has me up all night worrying and watching more videos about how to “get out of it”
some numbers for context, property value is about 170k, it has a Mtg of 90k. So theres decent equity, but it’d need about 20-30k in rehab.
I really want to hear all your opinions on this transaction.
Give it to me straight up, am I being stupid by doing this deal and risking it all, or is this something I can profit from without too much headaches..
Money (3k) is already in escrow with an addendum that if foreclosure filings has begun it’s refundable.
Pardon my ignorance, what happens if the seller stops making their mortgage payments? Suggestions on learning more about contract for deed? TIA
No problem. The whole point of this post is to answer questions like yours. Good question by the way.
In a Subject To, it isn't the seller making the payments. The seller is out of the picture.
The real question is what happens if the buyer stops making the payments: The property goes to foreclosure and the seller's credit gets trashed. The seller then can sue YOU!. You can also be referred to the State Attorney General for fraud. Don't miss any payments.
Your question: "Suggestions on learning more about contract for deed? TIA" \
That is an Executory Contract
Executory Contracts by definition violate the same Due on Sale that just got called
Here is the actual wording of the Due on sale clause
18. Transfer of the Property or a Beneficial Interest in Borrower. As used in this Section 18, "Interest in the Property" means any legal or beneficial interest in the Property, including, but not limited to, those beneficial interests transferred in a bond for deed, contract for deed, installment sales contract or escrow agreement, the intent of which is the transfer of title by Borrower at a future date to purchaser.
Thanks, I got the impression there was a difference between contract for deed and subject to.
There is a big difference between them.
The key element is :"the intent of which is the transfer of title" in law, the intent can be the determining factor, it doesn't have to actually occur or be done in a specific manner.
You can speed because you have your foot down too hard on the pedal or you can speed because you are going down hill. You're still speeding.
Thank you for all your insight.
So I’m on of Pace Morbys “students” I didn’t pay I just followed around the videos and Facebook group and now I’m quite worried about this deal that I’m committed to.
I have a deal that I am supposed to close on in 2 days.
Here’s what’s happening, seems like a subto student picked up a sfh for 4K and is paying the owners mortgage.
he then decided he would not continue to do so, and listed it as “take over payments” on Craigslist, for 17k. (His profit is in the entry fee) He owes 3 months missed payments and I offered to catch up the arrears, bring the loan current, and take ownership.
I myself own and operate 13 units since 2017, and I’d say I’m a good operator.
Anyways, the issue is that now the bank/owner has been notified of non payment, and while the seller is telling me everything’s fine between him and the person on the note and all, I know that the bank has eyes on this account now.
I'm sure even with a reinstatement (closing attny is working to get that), that this is not looking good for me once I become the beneficiary in the trust (the contract is for land trust beneficiary interest) of which my LLC would be 100% owner.
I’m sure you all can see the issues that can arise here..the DoS clause has me up all night worrying and watching more videos about how to “get out of it”
some numbers for context, property value is about 170k, it has a Mtg of 90k. So theres decent equity, but it’d need about 20-30k in rehab.
I really want to hear all your opinions on this transaction.
Give it to me straight up, am I being stupid by doing this deal and risking it all, or is this something I can profit from without too much headaches..
Money (3k) is already in escrow with an addendum that if foreclosure filings has begun it’s refundable.
You didn't say what your "buying" it for.
Does it make sense? It's just that simple.
No, not all the hokeum of this jazzy thing n that jazzy thing, just run the dang numbers, do an analysis, and does it make sense yes or no.
How you finance the buy is a separate thing. Never justify a bad buy because the financing is some jazzy BS.
Think about how stupid that messaging is, to say over-paying is "ok" long as the financing is some jazzy uber leveraged thing because your supposed to ostrich and assume everything will always work out a-ok.
Personally, I'd tell the 2 jokers there jazzy-BS didn't work, obviously, and I'm not going to join their circus of dumb. So, here is my buy offer, take it or leave it, end of story.
Rental Property Investor · Miami Beach, FL · Member since 2016 · 52 posts · 2 votes
2y
So the numbers work as both a rental and a flip. My idea was to hold it, make anywhere from 200-500/m cashflow. Then if I need to sell for whatever reason, I can flip the property for profit.
My thoughts is to invest just enough (10k) into the rental to make it a decent rental for section 8, guarantee the income. Then let’s say the loan gets called due, I’d put another (10-15k) make it a nicer product for a home buyer, and put it on the market.
But it wouldn’t be the easiest thing do to once you have to pay the bank back in 35days. I’d have to get a bridge loan for the time I am trying to flip. That’s about $900/month in extra carrying costs, but once sold it could potentially be worth it.
Pardon my ignorance, what happens if the seller stops making their mortgage payments? Suggestions on learning more about contract for deed? TIA
No problem. The whole point of this post is to answer questions like yours. Good question by the way.
In a Subject To, it isn't the seller making the payments. The seller is out of the picture.
The real question is what happens if the buyer stops making the payments: The property goes to foreclosure and the seller's credit gets trashed. The seller then can sue YOU!. You can also be referred to the State Attorney General for fraud. Don't miss any payments.
Your question: "Suggestions on learning more about contract for deed? TIA" \
That is an Executory Contract
Executory Contracts by definition violate the same Due on Sale that just got called
Here is the actual wording of the Due on sale clause
18. Transfer of the Property or a Beneficial Interest in Borrower. As used in this Section 18, "Interest in the Property" means any legal or beneficial interest in the Property, including, but not limited to, those beneficial interests transferred in a bond for deed, contract for deed, installment sales contract or escrow agreement, the intent of which is the transfer of title by Borrower at a future date to purchaser.
Thanks, I got the impression there was a difference between contract for deed and subject to.
There is a big difference between them.
The key element is :"the intent of which is the transfer of title" in law, the intent can be the determining factor, it doesn't have to actually occur or be done in a specific manner.
You can speed because you have your foot down too hard on the pedal or you can speed because you are going down hill. You're still speeding.
Thank you for all your insight.
So I’m on of Pace Morbys “students” I didn’t pay I just followed around the videos and Facebook group and now I’m quite worried about this deal that I’m committed to.
I have a deal that I am supposed to close on in 2 days.
Here’s what’s happening, seems like a subto student picked up a sfh for 4K and is paying the owners mortgage.
he then decided he would not continue to do so, and listed it as “take over payments” on Craigslist, for 17k. (His profit is in the entry fee) He owes 3 months missed payments and I offered to catch up the arrears, bring the loan current, and take ownership.
I myself own and operate 13 units since 2017, and I’d say I’m a good operator.
Anyways, the issue is that now the bank/owner has been notified of non payment, and while the seller is telling me everything’s fine between him and the person on the note and all, I know that the bank has eyes on this account now.
I'm sure even with a reinstatement (closing attny is working to get that), that this is not looking good for me once I become the beneficiary in the trust (the contract is for land trust beneficiary interest) of which my LLC would be 100% owner.
I’m sure you all can see the issues that can arise here..the DoS clause has me up all night worrying and watching more videos about how to “get out of it”
some numbers for context, property value is about 170k, it has a Mtg of 90k. So theres decent equity, but it’d need about 20-30k in rehab.
I really want to hear all your opinions on this transaction.
Give it to me straight up, am I being stupid by doing this deal and risking it all, or is this something I can profit from without too much headaches..
Money (3k) is already in escrow with an addendum that if foreclosure filings has begun it’s refundable.
@Leo Maldonado: Your Comment: "I really want to hear all your opinions on this transaction."
I was going to avoid answering, except for your honest request for a solid opinion.
I'm trying to be nice here, but I'm having a hard time trying to figure out how to explain how dangerous it is to do Subject To Pace Morby's way.
If you want to stay out of trouble, dump it, now.
I terminated the agreement. Thank you for the advice and yes my escrow is coming back to me. :) I was so sure that subto was a solid strategy, now I’ll have to educate myself more on this and see how to to it right in the future.
Pardon my ignorance, what happens if the seller stops making their mortgage payments? Suggestions on learning more about contract for deed? TIA
No problem. The whole point of this post is to answer questions like yours. Good question by the way.
In a Subject To, it isn't the seller making the payments. The seller is out of the picture.
The real question is what happens if the buyer stops making the payments: The property goes to foreclosure and the seller's credit gets trashed. The seller then can sue YOU!. You can also be referred to the State Attorney General for fraud. Don't miss any payments.
Your question: "Suggestions on learning more about contract for deed? TIA" \
That is an Executory Contract
Executory Contracts by definition violate the same Due on Sale that just got called
Here is the actual wording of the Due on sale clause
18. Transfer of the Property or a Beneficial Interest in Borrower. As used in this Section 18, "Interest in the Property" means any legal or beneficial interest in the Property, including, but not limited to, those beneficial interests transferred in a bond for deed, contract for deed, installment sales contract or escrow agreement, the intent of which is the transfer of title by Borrower at a future date to purchaser.
Thanks, I got the impression there was a difference between contract for deed and subject to.
There is a big difference between them.
The key element is :"the intent of which is the transfer of title" in law, the intent can be the determining factor, it doesn't have to actually occur or be done in a specific manner.
You can speed because you have your foot down too hard on the pedal or you can speed because you are going down hill. You're still speeding.
Thank you for all your insight.
So I’m on of Pace Morbys “students” I didn’t pay I just followed around the videos and Facebook group and now I’m quite worried about this deal that I’m committed to.
I have a deal that I am supposed to close on in 2 days.
Here’s what’s happening, seems like a subto student picked up a sfh for 4K and is paying the owners mortgage.
he then decided he would not continue to do so, and listed it as “take over payments” on Craigslist, for 17k. (His profit is in the entry fee) He owes 3 months missed payments and I offered to catch up the arrears, bring the loan current, and take ownership.
I myself own and operate 13 units since 2017, and I’d say I’m a good operator.
Anyways, the issue is that now the bank/owner has been notified of non payment, and while the seller is telling me everything’s fine between him and the person on the note and all, I know that the bank has eyes on this account now.
I'm sure even with a reinstatement (closing attny is working to get that), that this is not looking good for me once I become the beneficiary in the trust (the contract is for land trust beneficiary interest) of which my LLC would be 100% owner.
I’m sure you all can see the issues that can arise here..the DoS clause has me up all night worrying and watching more videos about how to “get out of it”
some numbers for context, property value is about 170k, it has a Mtg of 90k. So theres decent equity, but it’d need about 20-30k in rehab.
I really want to hear all your opinions on this transaction.
Give it to me straight up, am I being stupid by doing this deal and risking it all, or is this something I can profit from without too much headaches..
Money (3k) is already in escrow with an addendum that if foreclosure filings has begun it’s refundable.
@Leo Maldonado: Your Comment: "I really want to hear all your opinions on this transaction."
I was going to avoid answering, except for your honest request for a solid opinion.
I'm trying to be nice here, but I'm having a hard time trying to figure out how to explain how dangerous it is to do Subject To Pace Morby's way.
If you want to stay out of trouble, dump it, now.
I terminated the agreement. Thank you for the advice and yes my escrow is coming back to me. :) I was so sure that subto was a solid strategy, now I’ll have to educate myself more on this and see how to to it right in the future.
thanks guys.
Smart move.
Since I've been doing this for 30 years, I've done everything wrong that you can do wrong. According to the lawsuits, I even created some new “wrong” ones, they hadn’t seen before. ;-) I won each law suit, incidentally.
I can spot these a mile a way. Yes, we train on all of the things to avoid, as well as train people how to do them correctly. The "why" this one is so toxic is covered in the training. We want people to be happy and safe and profitable in their Subject To transactions. That means being able to spot what to stay away from.
Don't chase bears with bee bee guns. The bear will eat you.
Where can I learn to do this properly?
all I’ve learned in subto is from Pace Morby.
it’s frustrating to see a subto student of his, not follow through with his commitment to the original seller. That property will probably go into foreclosure.
Investor · Member since 2022 · 3k+ posts · 3k+ votes
1y
Quote from @Account Closed:
You must not read the news. That’s not how you get clicks. The headline that gets clicks goes something like “Banks get greedy. Force foreclosure on homeowner who paid on time, kick out tenants.”
Guess how worried you get when it’s your bank that’s named and that headline pops up? Imagine you’d share that article with your wife?
We live in a world where PR matters to EVERY business out there. Like it or not.
Ok, are you going to call out the bank now that you got it called on you? You're going to single handedly take down a stock?
You must not read the news. That’s not how you get clicks. The headline that gets clicks goes something like “Banks get greedy. Force foreclosure on homeowner who paid on time, kick out tenants.”
Guess how worried you get when it’s your bank that’s named and that headline pops up? Imagine you’d share that article with your wife?
We live in a world where PR matters to EVERY business out there. Like it or not.
Ok, are you going to call out the bank now that you got it called on you? You're going to single handedly take down a stock?
It’s already getting so many clicks on Instagram that all the mega banks are going under.
Real Estate Consultant · Fort Worth, TX · Member since 2011 · 45 posts · 39 votes
1y
There is no Due on Sale Police, the loan is serviced by a Servicer who is paid just a few dollars per month to service the loan. The money for the mortgage most often comes from a hedge fund type of investor or the Government, the Servicers concern is, is the loan preforming, is there insurance on the property and if the guy on the mortgage not creating any issues?
I have seen and heard many times over the years, "yea the Bank just wants to foreclose so they can reinvest that money in a higher interest loan" that is BS.
Let me ask you this, if you worked for a Servicer and you went to your boss and told them, "hey Boss I am going to foreclose on a bunch of preforming loans", how long do you this you would keep your job? How long do you think the Hedge fund is going to place more properties with that Servicer?
In my almost 20 years of doing Subject 2's and working with other investors in almost every State in the US, in the very few instances the Due on Sale is called it is because if the inexperience of the Investor in not knowing how the transaction is to be done, (not closing with a Title Company or Attorney, not doing the Insurance correctly)
Most of all, (not communicating with the seller) Bank calls the Seller to offer them Life Insurance or some other service, and the seller tells them, "I don't own that house any longer, some guy took that house from me and put some renter in it"
If you dig into any investor that tells you they had a property or a friend of their brother in laws Collage roommate that had the Due on Sale clause called, you will most likely find that the investor screwed up somewhere.
This is why Education and knowledge is needed on any Real Estate transaction.
I get calls almost everyday from someone who screwed up on a Subject 2 and is asking to be bailed out, many times they do not want to pay for help, and things just get worse.
If you know how to make the Bank Comfortable with the transaction, all is good.
Last year I had a couple of hedge fund managers call me asking how they can offer their under preforming loans to Investors to by Subject 2, wow what a great deal, I could call Pace and he would have buyers the same day for a 1,000 homes, but the legal aspect of this would hold the Hedge fund liable so we could not do a deal. If anyone here has any ideas how to make this happen, let me know and we will make a Million dollars in one day.
If the hedge fund has lets say 20% of their investments not preforming, and you were meeting with your Edward Jones guy, he will never suggest you invest in any under preforming fund.
So just remember to do the right thing and get an Education.