Process for a "sub-to" deal in CT

[Alexander King]

Taking over payments on a house or more formally known as buying a house "subject-to" existing mortgage is an excellent way to help out a home owner when other buying methods fail.  Its a win-win because you are stopping a foreclosure, building back the sellers credit, and potentially capitalizing on the past few years' low rates.  Our company has done this twice in the past two years.  Here's basically how we did it.

First, we use the standard P&S for CT to contract the deal at the amount owed. Under section 6 "financing" we write "sub-to".

Next, we create a new LLC with the property address as the entity, ie "123 main st llc". This helps because if the bank ever does a checkup, they won't see an investment company name- just a property that could have been put into an llc for estate planning.

After that we have our attorney start prepping the closing docs, title, and hud for us to have the sellers sign before a notary.  One important document in this packet is a power of attorney for the seller to sign.  Other docs I use I can share if needed.  

Lastly, it is important to make sure we have all the utility info and mortgage login info from the seller before we part ways with them because from there we make payments on their behalf.  

All and all, this strategy has worked well, the one barrier to entry for a beginning investor can be if the seller owes a large amount to reinstate the mortgage.  The first mortgage took about $15k to reinstate, but the second time it had rapidly accumulated to around $70k.  I think this strategy will become much more prevalent if rates continue to be in the 7%+ in the coming years.  

[Alexander King]

Quote from @Minna Reid:

Quote from @Alexander King:

Quote from @Minna Reid:

I think you will find the homeowners lenders to be your biggest competitor. The loan workouts they are offering right now are absurd. Predatory even, but they are pushing their workouts hard.

For example - right now FHA s offering the defaulters a deferred second with up to 25% of PB and all arrears, with a 40 year mod at todays interest rates. No income docs required. Its insanity. But its keeping a lot of foreclosure activity from happening.

Kicking that can down the road lol.

 No kidding.  Kicking the can is right.  I have never tried to take do a "sub to" deal on a FHS loan, do you know if this is possible?

You mean FHA? I mean realistically, it will be almost impossible to find a truly assumable loan. But the reality is no lender cares who is paying the mortgage as long as it's being paid.

Yes I meant FHA and true! Assuming the loan would be different and you are right no one cares unless payments start being missed!