Has anyone closed a subject to deal in ny?

[Kara Leboeuf]

Hi everyone! 
We have a very motivated seller who reached out to us. They just purchased their home 6 months ago for 275. The currently owe 268. They want to sell their home because they lost their jobs are are moving out of state. If they were to list on the market they would have to go to closing with cash. We offered them to take payment subject to their existing loan. They are all in and ready to move forward. Once we take over payments we plan to do a rent to own contract with a tenant where they buy the property in 3 years. I hear a lot of hesitancy and push back on subject to deals from sellers attornies in NYS. Our plan is to have our attorney write up the contract and then have the seller use our attorney to close as well. Does anyone in NY have experience on successful subject to deals or any feed back? 

Thank you!

[Jake Wiley]

I think the hesitancy you will find relates to the due on sale clause in loan agreements.    Essentially if the seller sells the property, the loan is due per the note/mortgage, so it's somewhat difficult for an attorney to complete a contract that clearly conflicts with another legal agreement and creates a cloud on the title, especially an attorney representing the sellers.   

The seller is the one taking the credit risk, but you would be put into a difficult scenario whereby if the note was called the property could be foreclosed on if you can't satisfy the note, and you might have to get the seller to come back in the picture to help clarify it all.   On top of that, you'd have a second rent-to-own contract with a tenant that could also be in jeopardy if you can't get the title clean or the property is foreclosed on.  

This all sounds bleak, but I am all for being creative to make the deals happen.    I just wanted to highlight what you are up against/risk so you know where the pushback is coming from and what you might have to accept in terms of documentation of the sale.   

Fingers crossed someone will pipe up with an investor-friendly real estate closing attorney that can help you get clear on the best path forward and options. In the meantime, I'd also suggest reaching out to the local REIA and asking for attorney recommendations.

Good luck and keep us posted on how this turns out.