Subject-to / Take over mortgage payments while Flipping

[Ryan Saulle]

Hello BP,

I am currently in contract to purchase & flip a property, trying to re-structure a deal with a seller. 

We were 10K off with the purchase price (we offered 160K, she wanted 170K). We came up with a solution to close on the property with no money due at closing. We will take over the mortgage payments while we do a quick renovation to the property(we pay for renovations). When we resell / refinance (we have 12 months), we will be able to pay her the 170K she needs to get.

Her attorney suggested that if we close on the property and go out of business, she will not be able to get her house or the 170K. Although we will not be going out of business, is there a way to structure this differently to protect the seller? Possibly a secured promissory note with the house as collateral? Any other options?

Appreciate the responses in advance for anyone who has done a deal like this or has suggestions!

Thank you,

Ryan

[Derek Dombeck]

You could put a wrap around mortgage in place to protect the seller. Essentially, they would be in 2nd mortgage position to the underlying 1st mortgage, but they have the right to foreclose in 2nd position if something happens to you.

Happy Investing 

Derek Dombeck