Buying subject to in FL

[Derek Nienaber]

Hi Everyone,
I would like some advice on buying a single family home subject to in the Pensacola FL area. The owner has a loan of approximately $40k which is VA and non assumable w/out prior consent. I would like to know what paperwork you use to create an agreement. Should I use a FL board of realtors purchase and sale contract? The loan is current so I assume I just start making the payments. Do I have the owner sign the deed over to me? How about title insurance, can I get it without a payoff on that mortgage? What specific papers do I use and what would I file at the county. Should I use a land trust to hold the property so the mortgage company doesn't notice the change in ownership. (I would call it the "Owners' last name" family land trust with me or my company as beneficiary)
Thanks!
Derek

[Jon Holdman]

Hi Derek Nienaber and welcome to BiggerPockets. You might want to post an introduction in the New Member Intro forum.

I split your post into its own thread, rather than tag along on an old one that was only somewhat related to your questions.

The state P&S contract is always a good starting point.

You would do the transaction with a title company or attorney (whichever does closings in FL, I'm not sure.) You definitely want title insurance. The title insurance and new deed will have an exclusion for the mortgage you're taking over. But you want to be sure there's no other surprises waiting for you. The title company will take care of all the filing with the county.

You want to be sure the seller understands the risk they're taking. If, at some point, you do fail to make the payments, they're credit will be affected. If they try to get a new loan (of any sort, not just mortgages), this loan will affect their chances. You want something IN WRITING where they state they fully understand the consequences. Even with that there is a risk they come to you in a few years and say "hey, we're trying to buy a new house but can't because of this old mortgage." But if you're up front and have their understanding in writing, they have less grounds for a lawsuit.

You might want to do a search of "subject to" here. There's a lot of discussion about this topic. There is absolutely no way to guarantee the lender doesn't find out about the sale. So, if you want to avoid losing the property, you should prepare to eventually refinance it.

From some of those discussions, plus ones I've had locally with people doing these transactions, the most common way the lender finds out is the insurance. You want a policy that protects you. But the mortgage company wants to see that policy, too. If it shows with your name and not the seller's name, the lender may investigate more closely.