SUB 2 ADVICE IN CALIFORNIA

[Jennifer Gibson]

I have an opportunity to do a Sub 2 in California (bay area). I have done several of these transactions in Texas successfully but honestly, I am new to this market and know the laws are very different. Does anyone have experience in this area that would be willing to share some advice, recommend a real estate attorney familiar with sub-2s etc? Thanks Much!

[Michael Galloway]

Jennifer Gibson, welcome, nice to see other Bay Area Investors here.

For starters David C. is correct. You will need an Equity Purchase Agreement. CIVIL CODE SECTION 1695-1695.17 is very strict and must be follow to the T.

Are you planning on moving into the property? Is it an option? Reason i ask is that you can skirt the equiity purchase laws in CA if you just move in. (i did this on one of my own properties) Also if there is enough equity might make sense with your 250k exclusion)

On the other hand if you are just going to rent it out or flip it:

Rule 1) Here in CA if an NOD is filed and even if its not and they (the sellers) have fallen behind in payments, you could still fall under this code, YOU MUST NOT GIVE THEM ANY MONEY , during there 5 day rescission period.

Rule 2) Disclosure, Disclosure, Disclosure
When you are setting up this type of transaction make sure you are upfront with all of your intentions. I am an Investor, I plan on reselling the house, I plan on renting it out. The value might be more than my estimates etc.

Lastly, word of advice, even after your transaction is complete if not done according to the law, the sellers can come back on this transaction even 2 years after the fact (kind of risky)

I tell you this not to scare you but to inform you. I do these transaction also, but before i do, i make the seller very aware of ALL of their options, (Foreclosure, Shortsale, BK, Modification, (some of these are not options, i know) hopefully you get the picture.

PS I would not try to do this transaction and then A Lease
back option, = Lawsuit waiting to happen.

If you need help with your EPA, hit me up on a PM, i can email you one of mine.

Disclosure I am not an Attorney, good legal council is always nice to have. i have referrals if you need them.
Good Luck, Michael Galloway