I need help with this deal

[Garrett T Colburn]

So I've came across this deal, sort of by accident but I just can't pass it up. The seller is extremely motivated. This will be a Sub2 deal if I can figure out how to actually do it. The person I've been speaking to is the sister of the owner, the owner ended up going to jail and could be facing foreclosure on his house. The sister is now his POA with the right to sell. They owe ~52k, it needs around ~10k in minor cosmetic repairs, and arvs at around 80k+. They deal they accepted is a sub2 with no cash down, I just assume the loan. How does this work? I know the basic concept but to be honest have no idea about the logistics between actually doing one. Can't seem to find solid answers anywhere I look. I spoke to my attorney yesterday and he's not too sure either. He was talking about a "due on sale" clause which I've heard of. Also this property is located in Indiana, and my attorney and myself are in Kentucky. Any help/advice on what my next steps are or how to even structure this? Thanks

[Brenden Mitchum]

Hey @Garrett T Colburn

I know this is not what you want to hear but if your attorney in KY can't help, you definitely need to find yourself a real estate attorney in Indiana that is familiar with subject-to to walk you through the process. 

I have never done one myself so cannot give you a step-by-step but essentially you start paying the mortgage for the seller. They avoid being foreclosed on but the mortgage stays in their name so they are still at risk if you stop paying. Another issue here is that "due on sale" clause, also known as the alienation clause. Essentially, this just means that the lender can call the entire amount due when the title changes owners. From what I hear, this does not happen often but it is something to think about. Keep in mind, the lender just wants their money, they don't want to foreclose so this is the reason they don't typically pull that clause.

There are several investors on here experienced with subject-to and even a great BP podcast on it (episode 70 I think). So maybe you won't find the full answer you're looking for but explore the site and see who seems to know what they're talking about and reach out to them. However, this is still no substitute for getting legal advice.

Please, feel free to message me anytime if you have other questions or just want to chat!