Sub 2 hang-up

[Paul Bush]

Hello! I have a sub 2 deal under contract at $181K and a retail buyer who wants to pay $220K to buy the deal from me, meaning he's going to pay me $39K cash to get the deal.

The problem is that he's nervous about the outside chance that the lender might enforce the "due on sale" clause after he puts so much cash into the deal... can anybody suggest how I might get him over this hurdle? I've already explained to him that banks simply don't enforce the clause on a loan that's being paid. Thanks for any advice!

[Jon Holdman]

At best a land trust hides what's been done. It doesn't make the problem of calling the loan due go away or in any way prevent the lender from calling the loan.

Saying that is going to land you in court and you are going to lose. That statement is just not true. If you're said that and the loan does get called that buyer is going to be after you big-time. You need to do just the opposite, in the end. Be very clear about the risks. You want a signed document from the buyer that they understand the risks.

With this much cash down they buyer should be in a good position to refinance, if the loan does get called.

Does this buyer really have that big wad of cash to pay you? Does this buyer really understand what's happening? This is an unusually large amount of cash to put into a sub to deal. Be very sure you're not twisting a naive buyer's arm into doing something they don't really understand.