Ethical/Safe Sub2?

[Ryan Dossey]

I've got a lead I'm working that this really appears to be the only option. Mortgage has a balance of 84k ARV is around 110k. Repairs for retail are 30k. Rental would be right at 8k.

They have health issues and are wanting to move in with their kids. They expressed being open to a shortsale but don't want to hurt their credit. They've never missed a payment on anything, have money to pay the bank, and don't want to get behind. (So I don't see that being an option) 

I would gladly take it over Subject to and it would cash flow pretty nicely. 

They just want to be done. Retail brokers have refused to list it. Just hasn't been updated. Green carpets, paneling, etc. 

There is a provision for transfer with credit approval. But also DOS without it. With my income (lack of w2) I don't see this going through.

They said if we can't figure this out they're going to board it and make the payments till they die. 

Advice? 

I've heard of folks mailing banks "notices" of intended sale?

[Bill Gulley]

Sub-to deals fine for the short term, less than 2 years, first year gets you past the purchase price snag on a refi and another year to get it the refi, but the contract term of 2 years doesn't mean sit and wait either, once past the 1 year mark and a couple months, get it refinanced. If you can refi in 6 months.....all the better, appraised value or purchase price whichever is less rules. 

When folks speak about holding a sub-to longer or long term, either they aren't fully aware of loan audits or life occurrences of a borrower that bring attention to these sales.

Bottom line is that lenders will and do call loans with the due on sale clause. Those that believe it's only a 1 in 100 chance  can believe what they will, but with that one that got called the borrower and buyer weren't so lucky. 

All you can do is hope you're lucky, because that's what you bank on, you can't beat the system, you can only go with the flow. 

Before you close on a sub-to you need an exit strategy in place, sell it, refi it or pay cash if and when it's discovered and called due, it might need a quick sale too. Every deal has a front door and a back door, know where they are.

Your real or perceived equity is always at risk with a sub-to, if you don't have the money to pay off the obligation you need to understand that you may need to walk away from some of that equity to live to fight another day. 

Don't forget that you can get hit by a bus at any time, the seller can sue you or your estate, if things don't go as hoped for you're flapping in the wind with a sub-to.

By limiting the time exposure of the risks involved you manage your risks, get those deals cleared off as soon as you can. It's always the risk and return evaluation, those you aren't financially stable may be willing to roll the dice for broke but as your assets and business grows that risk level goes up, so you may just avoid these risky strategies. :)