All Forum Posts by: Account Closed

@Joe Splitrock I did NOT say that I call the two the same. I said "some call it Owner Financing some call it Subject To", for a reason. I also said "There are other terms I won't get into here."

"Some" is not me. I did not say "I" for a reason. Don't put words in my mouth. I am very precise and touchy about what I say and how I say it. 

Also, the question was about the transaction, which I answered, not about the risks to the seller, which was not asked. 

You say "I personally don't think "Subject To" should be legal." Fine. But, it IS legal. I don't think horse sh*t should stink, but it does. ;-) Nope, not agitated, just precise.

@Natalie Kolodij and @Azah Che

Okay, I wasn't going to get this detailed but:

The transaction is likely perfectly legal. These are the only kind of transactions I've done for the last twenty years. Some call it Owner Financing some call it Subject To. There are other terms I won't get into here. The transaction is likely that a wholesaler found someone who either can't or doesn't want to list with a real estate agent. The property probably has a lot of rehab hence the $45,000 in repairs that the sellers are afraid to tackle or can't afford. They still want to sell. 

So, the wholesaler puts the property under contract and finds a buyer. The buyer takes the property "Subject To" the existing financing and takes over the existing loan, but does not assume it (assuming is a legal term and requires written permission from the bank).  There is no bank qualifying and credit isn't an issue. Since the wholesaler put the entire transaction together, they expect to be paid. They split $10,000 of the $12,000 the buyer is bringing to closing with the seller. So, the seller gets $5,000 and the wholesaler gets $5,000 and $2,000 goes to Title and closing. I have always been the buyer and flipped or cash flowed the property. I have not been the wholesaler. All loans these days by banks have a Due on Sale clause. When ownership transfers, the bank MAY call the loan due. The bank is not REQUIRED to call the loan due. I won a court case on this very issue by pointing that out to my attorney and the judge. The attorneys were impressed. (I am not an attorney.) 

My reason for hesitation on this transaction for Azah is that she needs to do her "due diligence" before jumping into it. It has to be done properly to be legal. I have not seen the Title report and I don't know the people involved, so I can't gauge the relative safety of the transaction.

If the Title is clear, I would jump on it and do these all day long. I would buy it in an LLC and record the Deed so it shows on Title. I would do minimal work on it, bring the arrears current if necessary, pay any back taxes and sell it as a "Minor Fixer" on a Wrap getting probably $25,000 down. I would carry the note. I would look on Rentometer and make the mortgage payment to my buyer a few hundred dollars more than what it would rent for and calculate the mortgage on a 30 year fixed while collecting the info necessary to be compliant with Dodd-Frank.

Or, I would fix it up and sell it if I was looking for "quick cash".

The questions isn't whether it is called "Owner Carry" or "Subject To" but rather how to properly structure the transaction so that all parties are protected as best as possible. I think she needs some training on that part, that's all.

Don't do Lease Options in Texas. Ask a real estate attorney for directions.

I would buy up plenty of land in New Zealand and grow microgreens.

@Natalie Kolodij Just a small but significant point. The bank does NOT own any portion of the property. They have a secured interest that they have to effect a foreclosure to enforce. The owner can do what they will with the property. It is then up to the bank, if they find out about it, and if they care about it, to issue a "corrective notice" or begin a foreclosure action to protect the money they have invested (the loan). 

This information is just for clarity so people can make the right decisions, and is not intended to imply one action or the other is the correct path for these circumstances.

@Azah Che  I think there is a hefty transfer tax in your state that would be in play twice, once when you bought the house and again when you sell it. They may be trying to minimize the tax. However, if you can't get clear title, there is no point in pursuing the transaction anyway. I'd have a real estate attorney take a quick look at it to see if it is legit.

We have an Owner financed available in Kyle. Much more reasonable than Austin. 

It is quick to evict in Texas. You need to find the LandLord Tenant laws for the county and for the city that the rental is in. I would also locate an eviction attorney in that city and have a half hour phone conversation.

@Ryan MacDonald My partner and I work in the South Austin to San Antonio neck of the woods. There are a few questions that need to be answered first. 

1) Have you run a Title Report?

2) Is the house completely paid off?

3) Will your payment be cash to totally pay off the property to them?

Ken

Sure. Buy it in an LLC. Divide it into 4 shares. You own two, he owns two. What he chooses to do with his two shares is his business (rent out or live in). You determine the rent for each unit, say $800 per unit. He pays his rent to the LLC each month. Each of the 3 other units pay rent to the LLC. You cover costs out of the LLC. Anything left over goes into a reserve for the roof you need to buy or the siding you have to replace, or the AC unit that fails. Don't forget property tax and insurance costs. You split whatever is left over. Make sure your LLC contains a "buy out" provision and a provision for ultimately selling.