Foreclosure property but concerned of the Due on Sale Clause

[Patricio Yrizar]

Hi guys,

I found a property that is going through foreclosure, and thinking of getting it on seller financing one part of it but also taking over the owner's loan payments. The only thing that I'm concern about is the existing lender applying a due on sale clause once the title is transferred to me. I heard that I might be able to a buy it on an agreement for sale or executory contract were I'll be the owner but I don't show a transfer of deed, however, I don't have a lot of experience with it. 

Do you guys have any advise on how to get it without the risk of the due on sale

Thank you

[Matt Pursley]

The Due On Sale clause is ALWAYS a possibility. I'd recommend a few things. Find a GREAT attorney familiar with creative financing strategies. They should be able to walk you through the process so you know what you need. 

In my experience, big banks tend to care less. It definitely depends on what stage in foreclosure they're in. If you're seller financing AND doing Sub To, you definitely need a skilled attorney. Every situation is different, but why not just do Sub To, catch them up on their mortgage then continue to make payments and sell it? Are you looking for a long term rental? If so then you need to make sure you have exit strategies for the Due on Sale clause. If the bank calls it due, do you have the money to cover or refinance, or is it in desirable enough condition and location you could sell quickly to another investor or retail buyer? Could you do a quick rehab and then list it?

If you can think ahead and plan for worst case scenarios, then you'll be ready if it happens. Hope this is helpful.