Due on Sale, Why It Matters if You Buy Subject To

[Account Closed]

There is a lot of discussion and worry about the Due on Sale clause when buying Subject To. 

Wow - what a mouth full. What the heck does that mean?

"Subject To" is when you take over someone's mortgage and take ownership of the property. But, when you do that, you are violating the terms of the agreement the seller signed up for, when they took out the loan. So, what to do?

It's mostly an issue when you miss payments on the mortgage. Or when the person you bought from gets tired of waiting for you to refinance to get his name off the loan, or when someone who used to be on the loan or title calls the bank and says they want off the loan, or when an angry ex-spouse calls the bank and reports that their ex-spouse sold the house or when the house gets squatters and the neighbors call the police and the police call the lender or when a whole bunch of other crazy stuff happens.

It goes downhill awfully fast after that. But, are there solutions? Yes, some solution take money and others that don't. It depends on what happened, which lender, how well you can negotiate, how much money you're willing to throw at the problem. 

But, it won't go away on it's own.  Do not believe someone who says they never get called. I just had one called. They are popping up in the media more frequently now. They don't show up as "Subject To loan called by Big Bank, Inc." They show up as District Attorney investigating  John Q Public, investor. 

There are a lot of ways to avoid the drama. Here's one way https://www.biggerpockets.com/forums/311/topics/1141313-subj...

But, the Due on Sale clause has a lot more to it and you can see the rest of the story at the link below, then click the "Due on Sale" button.

[Chris Seveney]

@Mike Hern

As a note investor buying loans on the secondary market, we look for loans which were sub2 loans. If we see them we start licking our chops because we will buy them, call the loan and most borrowers don’t have it so we will start foreclosure. You want to talk about the $it show that creates….