Subject to, rehab then sell

[Tracey O'Hara]

I have a scenario that I need help with please. I have a very motivated seller who wants to just sell his house for the mortgage balance of 287k. The house is in a very desirable school district, has a brand new roof, needs about 50k in rehab and would ARV about 415k. The seller will not do a subject to sale, however, I have him thinking about leaving the mortgage in place for one year while I make payments, rehab the property, then sell and pay off his loan. Has anyone ever structured a deal like this? Is it even legal? What happens to my equity should the house not sell (I know it will, but thinking worst case scenario) and the owners move back in? And should I get builder's risk insurance on the property? Will getting additional insurance tip off the mortgage holder? Any other pros/cons to doing this deal?? All help is greatly appreciated.

[Neil Sinha]

@Tracey O'Hara, if I understand you, the seller won't do a subject to, so he wants to move out, keep the deed, you put in 50K in rehab plus the mortgage holding costs, and then let him sell, and then try and get a portion of that profit because you fronted those costs?  Without the deed to the property in your name, that seems like a lot of exposure you take on without any control or any protection for your interests.