When we do Sub 2 deals, we use an attorney to do the documents and the closing. We have them create a mortgage document between us and the seller that basically makes the seller the lender and incorporates the terms of the underlying loan. Since title transfers at that time, we get an insurance policy in our name with the original lender and seller named as additional insured.
The Due On Sale clause would be triggered at the choice of the lender, but it depends on the lender as well as how they would find out. We haven't directly notified the lenders and we just understand that it is a risk that comes with doing sub 2.
As for contract, we don't have a specific purchase and sale contract. We have an addendum that an attorney put together that we add to the specific state P&S in order to incorporate the sub 2 terms.
But, we always go through an attorney to create the documents. We do sub 2 by creating a mortgage (wrap) with the seller.
Since you aren't selling the home sub 2 to an end buyer, you may not have to worry as much about Dodd-Frank, but that is why we use an attorney as well as a residential mortgage loan originator if we are selling it to an end buyer. If you are renting, that is a good model.
On another note, one option we have used in place of sub 2 is to lease option the property from the seller and have the lease option mirror the underlying mortgage terms. Title doesn't transfer, but your lease can grant you rights to fix it up and lease it back out. The option in the lease is tied to the underlying loan balance. We also use an attorney for these.
Just some thoughts...
