All Forum Posts by: Brady Hales

Quote from @Account Closed:

Quote from @Tom Gimer:

@Brady Hales A transaction coordinator can't minimize anything. Once a loan is called, it's called. Ask any of the many lender professionals on this site. Perhaps @Ron S. would like to comment.

$1000-$1500 for providing nothing of value just sounds like that TC becomes an additional defendant in a lawsuit.

The due on sale insurance provider can't even afford a free SSL certificate.

I asked a TC who was posting a lot here, hyping Pace Morby and the "Subto community" if he had any liability after putting together a transaction. He said "no, just like an escrow company or title company, once they finish their side in escrow, there's no liability". hehehehhehehehheh lol lol lol lol my sides hurt with roaring laughter.

I guess he doesn't know that Fidelity flew in 6 people from CA to tesitfy in a "Due on Sale" case I was involved in. That seemed pretty expensive to me. That was 6 people, a couple of whom were attorneys, that weren't in the office that day.  Let's see, they had prep time, travel expenses, lost time doing "important" things. ;-)

Come to think of it, that may have been an important case at the appellate level for some reason.

I think that person is pretty naive. If I am not mistaken, anybody involved in the transaction has at least some liability which is why I know there are several brokerages that don't allow their agents to participate in some creative type transactions that they do not have state approved realtor contracts for. Like I said to @Tom Gimer though, I would defer anybody reading these comments to you guys because you guys have more experience and knowledge than me here.

Quote from @Tom Gimer:

@Brady Hales A transaction coordinator can't minimize anything. Once a loan is called, it's called. Ask any of the many lender professionals on this site. Perhaps @Ron S. would like to comment.

$1000-$1500 for providing nothing of value just sounds like that TC becomes an additional defendant in a lawsuit.

The due on sale insurance provider can't even afford a free SSL certificate.

All I meant by minimize is that an experienced transaction coordinator should know the standard process for things like insurance on a subto transaction. I know many newer people to subject to transactions mess up the insurance on which cause the loan to get called due. I didn't mean that they can help after the fact though. The Due on Sell "insurance" provider I commented on here in this post was a few years ago when I was new to real estate and after I had first heard of the episode on the first Pace Morby interview Bigger Pockets did which was before I found out it wasn't really insurance at all. And since that time has passed I have become more discerning and would honestly never trust that site. Like you said they can't even pay for an SSL certificate and the site had been "under construction" for over a year. I am not very experienced in this area and am sure you have more experience than I do so people reading these comments should probably defer to you or Mike Hern on this topic.

Quote from @Joe S.:

Quote from @Brady Hales:

Here is their website. They specifically mention the due on sale clause insurance.

https://www.equityassurance.us/

This is what came up when I went to the link/site you mentioned.

Hmmm… not really sure what they are doing with their website. It didn’t used to do that. In any case I have since found out it isn’t really an insurance product since I first made a comment here. It is “assurance” which means they just make sure you close in a way that minimizes the chance of a due on sale but it is not an insurance product meaning they will take over your loan if it gets called due. Instead of going through them (whom I have never used) I would now just recommend finding a reputable transaction coordinator who specializes in creative finance and they will essentially do all the same stuff to minimize the chance of a due on sale happening. A typical fee for this service is in the $1000 - $1500 range.

I follow a guy named Ted Thomas on YouTube. He has a TON of really good information on tax deed and tax lien investing.

Is your attorney a real estate specific attorney? I have found that pretty much all attorneys who are not real estate specific really have no clue about real estate laws and processes. Deed of Trust has nothing to do with ownership of the property. There are mortgage states and deed of trust states. In a mortgage state there are two parties on the loan the borrower and the lender. In a deed of trust state there are three parties. The borrowe, the lender, and the trustee. Essentially, the only difference is that in a mortgage state the foreclosure is handled by the bank and in a deed of trust state the foreclosure is handled by the trustee on behalf of the bank. That is it. It has nothing to do with ownership. The debt and the deed are not the same. They are completely different and my own family attorney doesn’t even understand that. This is why I say you must get an attorney that focuses only on real estate.

If I were you I would go to Creative Finance with Pace Morby Facebook page (it's a free group) and make a post asking for a transaction coordinator. If you are going to do a SubTo deal you will need a limited POA from the seller regarding their insurance policy as well as access to their mortgage statements, you will need to setup a servicing company so that the seller can have this debt removed from their DTI in 12 months, the seller will need to understand the challenges of DTI during this period, you will also need a limited POA regarding the insurance policy on this property. When you do cancel the sellers policy you will need to have your own policy setup in a way that protects the seller but is still satisfactory to the bank. The greatest cause of the due on sale clause being called isn't the deed transfer it is the insurance. Most people mess up on the insurance. But all of this is why having a TC familiar with Creative Finance is important. They will make sure all of this is correct for you and leave you in a good place. Also what happens if the due on sale clause is exercised? Are you going to refinance the seller out? My contracts essentially state that the property can be deeded back to the seller and then repurchased on a contract for deed at the same terms. This will satisfy the bank and be a cure for the default but your contracts have to be solid and state all this stuff and the seller has to be on board for all of these challenges when doing a SubTo.

Most investors that I know of that are concerned about CoC return never do cash transactions. They do a hard money loan at best or they buy the property Subject to the existing mortgage. So if there is a specific reason why you purchase cash like you don't believe in carrying debt I guess it could make sense. But typically if you run the numbers it would be better to go out and buy 5 properties with that money and hard money loans rather than tie all your money up in one deal. Typically CoC return would be better in this case.

I guess it could also depend on your exit strategy. I wrote my reply assuming LTR but maybe your exit strategy could justify the full cash transaction.

It really depends. I would get a Hard Money Loan and whatever isn’t covered by the loan I would do the 0% interest credit card strategy. If you build out your credit profile you can get 0% interest with credit card lines upwards of $50k for anywhere between 6 - 18 months. If you do it on a business card chances are good it won’t even affect your personal utilization score.

Many veterans also don't know you can have more than one VA loan at a time. It all depends on the amount of entitlement you use. You could even have more than 2 if the properties are cheap. I would check out this video. It goes through the entitlement and how to calculate it.

One VA Entitlement to Rule Them All

I wonder if the attorney misunderstood the situation. I believe the Garn St. Germain Act of 1982 states that if the primary residence of the deceased is transferred to a relative as a result of the death and it becomes the primary residence of this relative than this does not qualify as a default in the sense that the bank is allowed to exercise the due on sale clause. I guess theoretically if this triplex was the primary residence of the deceased and you were also going to use it as your primary residence than the bank should allow you to continue payments under the current mortgage. However since this appears to be an investment property that would not be the case.

Depending on the worth of this property you may consider hiring a real estate attorney that is familiar with subject to transactions. I know a few people that have conducted subject to transactions after a person has died. This would allow you to essentially have an unqualified assumption.

Also, is there anything in the trust language forcing the closure? My understanding is that there is no legal requirement for the trust to close. Many people try to make their trust stay open as long as possible. For example: rather than distributing $1,000,000 to a descendent they might have monthly distributions of $5,000 for 20 years until it runs out. Many people prefer to do it this way because very few people can be trusted with a huge one one lump sum to spend it wisely. So I am confused why the closing of the trust is important unless the trustee just doesn’t want to worry about a situation like this. Maybe you could pay the trustee in this case to allow it to continue in the trust.

I am not an attorney though so someone else may be able to provide more light on this or correct my understanding of the law. 

@Peter Woerner my heater is original to my house (1975). Called an HVAC repair man for a pilot light issue and found out the heat exchanger has "failed". There is a crack in it. The heat exchanger removes the combustion products like CO2 and CO. Technically a crack in the heat exchanger could lead to CO2 and CO being ventilated through the house instead of outside. Although the furnace works just fine, the repairman strongly recommended I replace it due to safety concerns. I never knew a crack in a piece of metal inside the furnace would be such a safety concern. It may be worth it to pay $150 for an HVAC technician to come out with a scope and inspect the furnace to make sure it is still in good condition and poses no safety concerns.