Subject to, Sub 2, escrow accounts and insurance

[Matt Fish]

Hi BP,

I have listened to several of the podcasts on BP and read several forum posts about subject to purchases, but I have a few questions regarding the logistics that I am hoping you can help me with.

When investors purchase a property using this strategy, what do they do about the escrow account? Any overages would be returned to the original owner I would think.

Also, how do you insure the property properly? Since the funds for the insurance policy are escrowed as part of the mortgage payment, the insurance would stay in the seller's name.

1. If the seller cancels their policy when they sell, the mortgage company would be notified and would need to contact the seller. The mortgage company will require an insurance policy in the name of the owner - who they think is still the seller. This would certainly be a trigger for the due on sale.

2. If the buyer obtains an additional insurance policy to cover them as owner, and leave the seller's policy in place, I would think that would cause an issue if there is a loss because are 2 companies going to pay a claim on the same property? Plus you would be paying for both of those policies increasing your costs.

3. Are those doing sub to deals just contacting the mortgage company and being up front about what you are doing and risking due on sale?

There must be something I am missing here, but I just don't see how the escrow and insurance issue is worked out. It sure seems like there are a many people doing these types of deals though so I am hoping to get some good insight. Thanks!