Subject To - Florida

[Ryan Allison]

Looking at a property in Florida that is a subject to deal.  5.75% interest, $54K outstanding but the owner is requesting $22K in cash & I would take over payment.  Owner purchased a little over a year ago for about $70K.  

I've never done a wholesale / subject to deal in FL.  What are the risks of this from the buyers' point of view?  Any issues w/ insurance / bankruptcy risks, etc?  

[Bradley Sriro]

@Ryan Allison This doesn't sound like much of a deal at all unless the home is worth significantly more than $70k now. Especially with the seller wanting $22k cash and them still owing $54k on it. That puts you at $76k without even considering closing costs. Also, there is no benefit to doing a subject to deal with outlaying that much cash relative to its total value. If you did conventional financing and put down 20% on lets say an $80k home, your down payment and closing costs would be less than $22k and you would have a much better interest rate than 5.75% and none of the other risks associated with a subject to deal. 

The most common risk of subject to deals involve triggering the due on sale clause and the lender possibly (not common at all but possible) calling the note due in full. If you ever do one, you have to obtain your own insurance policy for the property in your name and list the lender as the additional insured... Once you transfer ownership, the prior owner's policy becomes null and void. I would also recommend getting a warranty deed so you can get a title insurance policy as opposed to a simple quit claim deed. Also, make sure that you get a limited power of attorney from the seller so that you will have authorization to deal directly with the lender. You will also want to make the payments to the lender directly as opposed to paying the owner and trusting that they are making it. This way you ensure that the mortgage is being paid. It is also best to obtain access to the lender's online payment portal if they offer one. This way, you will have access to mortgage statements, tax statements, etc. You should also change the mailing address for everything from the seller's address to your mailing address so you don't miss anything. Keep in mind that the property taxes will likely go up once you become the new owner as well since they will be based on the new assessed value. Just a few things to keep in mind. Hope this helps.