First sub-to deal as seller, desperately need help with verifying agreement

Grand Rapids, Michigan
Creative Real Estate Financing
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First sub-to deal as seller, desperately need help with verifying agreement

Ryan Tongue
Investor · Grand Rapids, MI · Member since 2021 · 49 posts · 21 votes

Hey guys, need help finding a lawyer.

I bought a few rentals a couple years ago in west Michigan, long story short, we've got to let go of one because we're over leveraged.

Our lender wrote a bad loan, we purchased the property for more than it's worth, now we aren't able to sell it properly without bringing a lot of cash to closing table — cash we don't have.

Found an investor who's willing to purchase the agreement sub-to. They just sent over the agreement and it's pretty scary/confusing.

I'm now looking for a real-estate lawyer in Michigan who can review this sub-to agreement and let us know if we're being stupid or not.

Any recommendations would be much appreciated.

Cheers,

Ryan

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  • Matthew MorrowBusiness Member
    Investor · PA - NY - NJ · Member since 2019 · 521 posts · 185 votes
    19h

    @Ryan Tongue Don't sign that until a Michigan real estate attorney who actually does creative and sub-to deals reviews it. Not a generalist, and not the buyer's guy. Due-on-sale, who's on the hook if they stop paying, insurance, and how you get the property back if it goes sideways are the parts that get people. A local title company can usually point you to someone who's seen these. Worth the fee before you hand over the keys.

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    17h

    I can give you some free advice:

    1. NEVER EVER sell sub to.

    that being said if you want to sell and leave your mortgage in place for the new buyers they either

    A. do a formal assumption ( which of course the buyer most likely will never do)

    What you do is WRAP your loan with a loan with you as the beneficiary. So that payments come to you then you make the payments on your mortgage.. This way you have instant knowledge that your payments are being made.. And two if they stop paying you simply foreclose them out.. If you sell sub to you have no rights to unwind the deal if the buyer just walks away from you.. does not matter what agreements you sign if they ghost you and just steal the rent and dont pay the mortgage your going to end up in foreclosure and your credit will then be toast. When you wrap the loan with your loan you remain in control 100% and you do need reserves if the buyer fails to pay and you want to protect your credit you still need to pay the bank . And again while this is going on your buyer is keeping the rent money.. This is what happens with all these under-capitalized guru trained sub to buyers.

    Now if your buyer can be vetted and you get a personal guarantee on your wrap note thats what you want..

    OR, if you dont mind your credit being risked just sell sub to and hope for the best.

    So find your RE attorney this is pretty basic stuff to most attorneys if they do any real estate at all. And ask them how you can wrap your existing mortgage so you stay in control.. AS for the risk of sub to any attorney that knows anything about how notes work is going to give you the same warnings I have given you.

    Also those that say we will pre sign a quit claim deed back or a deed in Lui you want to  ask the attorney those may cause your title to be screwed up going forward as per signed quit claims are not legal in many states.  Also you would have tax ramifications. 

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