Subject to deal - Florida

[Jon Malham]

Hello everyone. I'm currently working on a subject to deal in South Florida. The sellers are very distressed and just want out. They are in the process of loan modification and are already 2 months behind in their payment to the loan mod bank. They basically say we can have the house as long as we take over payments. They owe $160k on the house and it's worth about as much as they owe. My partner and I are looking to buy and hold at least for the next 7-10 years if not longer. This will be an income property that will yield us $1,500 per month in positive cash flow plus additional cash flow per tenant we bring in (it will be a halfway house, my partner is very experienced in this business). It needs about $20,000 in work to make it tenant ready.

Since this is my first REI deal I have multiple questions.

1. Do I have the title company perform all necessary searches before we close on the deal? I would like to get this done as cheap as possible. I met with a title company last week and was quoted over $3,000 to close the deal with all of their fees. Seems very high. Can't they just do a lien/title search only?

2. Where do I get the contract? I have a standard Florida Real Estate Contract. I would assume I would add a "subject to" addendum to the contract but want to make sure I'm protected. Would it be wise to have a real estate attorney take a look at it?

3. Do we perform inspections?

Our other option is just to lease purchase the house but the owners have zero money and would not be able to make any repairs if something went wrong. We really need to own this house if we are going to make this deal happen.

Any help or advice would be greatly appreciated.

[Deidre Egipciaco]

I am not sure if you have already closed on this transaction but here is my take as I am a Closer for a Title company in Orlando.

I agree with everyone's comments. Definitely make sure that it's going through a Title Company to ensure you receive your Owners Policy. I do have to say that even with the mortgage being an exception to the policy that the language on the mortgage does not contain an acceleration clause in case of transfer. I see it too often these days where title is not conveyed properly and I have to search out the original note holders to fix issues or even obtain pay off information in the case of a resale.

Just my personal experiences resolving these issues for others. As far as fees - you are probably paying for both sides since this is a distress sale. It takes time and effort to ensure title is transferred properly, if you were to go to an attorney they would quote you almost double.

Whatever you do please don't just take title via a quit claim deed.