Questions about subject-to purchases

[Indy Smith]

Hi everyone, 

Can someone please clarify a few things about subject-to for me? 

I understand that you essentially take over the existing mortgage from the seller, thus "subject-to the existing mortgage". 

Does the buyer have to qualify for the loan with the sellers lender? Or does title just transfer and then the buyer is responsible for the payments?

Does the lender ever call the loan due when title transfers? 

I ask because I have an opportunity to buy a property this way. The loan balance is $75k, the house is probably worth about $120k. I recently moved and have started investing in real estate full-time so I would not be able to qualify for a conventional refinance if the lender called the loan due. 

Thanks in advance for any responses!

[Tyler Gibson]

@Indy Smith you would not contact the lender to see if you qualify for the loan. The title would just transfer and then you would be responsible for the payments. 

Yes sometimes the lender does call the loan amount due if the loan documents say they can (which most do) I have heard mixed reviews on this. I know a guy here in Orlando that all he does is Subject to investing. When I asked him if he had ever had a loan called due he said no but he did something very smart. He creates a trust in the seller's name with himself or his LLC as the trustee.

Example ... the seller is named John Smith the buyer has an attorney create the John Smith family trust with equity buyers LLC as the trustee of the trust then does a quit claim deed from John Smith to John smith family trust. The bank may get notice of the title transfer but sees it going from what looks like the owner to the owner's trust. the buyer then makes the repairs he needs to get the property to where he can refinance and change the title straight into the LLC.

Caution with subject to because at least here in Florida if you fail to make the payments on the loan you could go to jail. If the loan gets called and you can't cover it you could go to jail.