Step by Step Subject to Existing Loan

[Account Closed]

Hi everyone,

So I understand the basic concept of a subject to agreement, where the seller agrees to sign over note or deed to the buyer, and the buyer begins making payments to the existing mortgage in lieu of the seller. I have a seller that is willing to agree to such a sale, but this will be my FIRST deal, and I want to make sure I dot all my I's and cross all my T's on this one. If someone could offer me some step by step info so I don't miss anything that would be great. Iv'e heard from threads and videos that others use their company name. Does this mean the deed cannot be transferred to an individual alone? Its questions like these that are leaving me stumped.

[Jon Holdman]

The "grantee" on the deed can be you or your LLC, as you wish. Putting the property into an LLC may be desirable for asset protection.

Ownership is with the buyer. The owner gets the mortgage interest credit.

Get a Power Of Attorney from the seller giving you the right to deal with anything related to the property.

Various theories w.r.t. notifying the lender. Some claim if you notify the lender and they do nothing you're off the hook on due-on-sale. I don't buy it. Nothing is going to protect you from the due on sale clause. As long as interest rates are low and the loan is getting paid I doubt the lender will call the loan. If interest rates go up (I paid 9% on a 15 year owner financed loan on the first house I bought in 1987 and was VERY happy with that deal), rest assured these subject to loans will get called.

There is a lot of discussion here about subject to. Do a search on that term and you'll get a much more thorough discussion than I will give.

I think this may make sense if you have a plan to pay off the loan fairly quickly. As in a fix and flip. Or fix your credit and refi. I think the long term risk is too high for me to sleep at night.