All Forum Posts by: Tracy Z. Rewey

@Brandon Robertson Interesting situation.  Have you pulled title on the property?  It would be good to also have that in hand to know where your legally stand.

Great post topic...I'm going to pop some popcorn and will be back for the show.

Just to get things rolling. Because it takes "an expert" to explain novation, avoidance of due on sale clauses, ignorance of state foreclosure rescue statues trusts, why you don't need title reports, attorneys or reserves, and don't forget to throw in the Garn–St. Germain Act as the interlude?

For clarity, the above is a bit of sarcasm.

I love a good creative financing transaction when done safely and ethically. There is a video (free on YouTube) by Attorney Jeff Watson titled "How To Do a Subject To And Do It Right" that I highly recommend.

Welcome to the BP community @Maryann Nichols

There are many here to help on your journey. In addition to the different tracks @Chris Seveney descrubed, there is also good information on creative financing and seller financing (including what to avoid).

3 Days. 30+ Speakers. Unlimited Results

Want to find funding for real estate deals and new ways to generate cash flow?

Join us for the 7th Annual Cash Flow Expo Virtual Summit.

Discover strategies working in 2025 including seller financing, wrap mortgages, private money lenders, self-directed IRAs, partials, hypothecations, land, mobile homes, and more! 

Register here to attend free: www.CashFlowExpo.com

Here's this years line-up:

Day 1 - Thursday, February 6th (all times are EST)

Sponsored by FNAC

9:50am - Fred Rewey and Tracy Z - Welcome to Day One

10:00am - Tracy Z - Make Notes Come Alive in 2025: From Creation to Resale

11:00am - Nathan Turner - Why Boring is Better

12:00pm (Noon) - Joe Watters / Rachel Sims - 50 Years of Buying Notes

1:00pm - Wendy Sweet - 10 Things You Need to Know to Fund your Deal

2:00pm - Panel with Fred Rewey, Mark Monroe, Dave Putz and Brett Burky - Note Trends In Social Media and Online

3:00pm - Vena Jones-Cox - Creative Private Lending: Wrap and Equity Sharing Loans

4:00pm - Jeff Watson - Private Lending from a SDIRA

5:00pm - Dan Deppen - How to Create a Valuable Seller Financed Loan

Day 2 - Friday, February 7th (all times are EST)

Sponsored by 7e Investments

9:50am - Fred Rewey and Tracy Z - Welcome to Day Two

10:00am - Marco Bario - Using "The Soft Skills Edge" To Close More Deals

11:00am - Dawn Rickabaugh - Round Table Investing: Profit From Every Seat at the Table

12:00pm (Noon) - Chris Seveney - 2025 NPL Playbook: The Best NPNs to Target in 2025 and Why

1:00pm - Collin Taylor - Investing in Alternative Assets in a Self-Directed IRA

1:30pm - Bill Fairman - Be The Bank: Passive Investing in Real Estate

2:00pm - Panel with Tracy Z, Donna Bauer, Chi Nguyen and Marishka Pilch - Women-Led Wealth: From Inspiration To Action

3:00pm - John Fedro - Make Much More Money with Mobile Homes in 2025

4:00pm - Jamie Bateman - Is Mortgage Note Investing Actually Passive?

5:00pm - Panel with Tracy Z, Byron Rouda, Jay Redding, Crystal & Rick Rumer, and Tom Chase - Investing Beyond the Norm: Discover Alternative Assets

Day 3 - Saturday, February 8th (all times are EST)

Sponsored by NoteSchool

9:50am - Fred Rewey and Tracy Z - Welcome to Day Three

10:00am - Liz Faircloth - How We Transformed a Vacant Building into a Profitable Sale

11:00am - Nate Hare - Creating Cash Flow Uncle Sam Can’t Touch, Using Money You Already Have

12:00pm (Noon) - Eddie Speed - The Power of Time in Note Investing

1:00pm - Ellis Hammond - Invest Like the Bank with Private Credit in 2025

1:30pm - Fred Rewey - Why AI Changes Everything...Even For You!

2:00pm - Panel with Tracy Z, Rosette Powell, Sohail Badruddin, Sadhna Bhardwaj, and Melissa Bolling - Servicing Notes Smarter, Not Harder: Best Practice for Note Investors

3:00pm - Mary Hart - Write Your Ultimate Love Letter: An Essential Guide to Estate Planning for Investors

4:00pm - Dan Zitofsky - Be the Bank with Seller-Financed Notes You Create from Turn-Key Rentals

Can't make it live? VIP Access with recordings are also available.

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See you online!

Quote from @Ken M.:

Quote from @Tracy Z. Rewey:

Quote from @Ken M.:

Quote from @Tracy Z. Rewey:

@Tracy Z. Rewey: What is the solution for a Due on Sale call when you buy using SubTo and sell using a Wrap?

Great question.  That (and insurance issues) are two big risks. All fancy footwork and tricky strategies aside (insert sarcasm)... the ultimate solution is to pay it off if it gets called due. 

It is one of the reasons I like a Wrap Note and Mortgage (or Deed of Trust).  If created correctly, it could be sold (in full or part) to a note investor that would payoff the underlying 1st from proceeds when they bought the wrap note. 

The other way to satisfy is to get the property owner to refinance but that is not always in your control.  With a properly written and qualified wrap note the seller of the property (that is the holder of the wrap note) still has an interest and an asset they can sell. A good attorney, RMLO, and servicing company play a big part of this.

.
@Tracy Z. Rewey: Your Comment: "the ultimate solution is to pay it off if it gets called due."

Hint: Once you sell a property on a Wrap, it is no longer yours to sell or refinance.
So, are you saying "you pay off a property you no longer own" out of pocket?

How do you call a performing Wrap due, in order to cover the Due On Sale on a property you did a SubTo on if your buyer is within his rights on the Wrap?

Put another way,
1. You buy a property SubTo 
2. You sell the property to someone on a "Wrap"
3. The lender finds out the property has been sold, twice now, and exercises their rights under the Due On Sale and gives you 30 days to correct or they go to foreclosure.

What happens?
What do you do?

Hi Ken, You are right you no longer own the property when you sell on a wrap.  You now own the mortgagee's interest in the wrap mortgage and note (or the beneficial interest in the all inclusive deed of trust).  You are collecting payments on your wrap note and mortgage from the owner of the property and sending on some of the payment to the underlying lien holder (or better having your licensed servicer do this).

What you have to sell is the wrap mortgage to a note investor.  When note investors buy the rights to receive payments on the wrap mortgage, we will payoff the underlying lien out of proceeds. 

You are not selling the property.  You are selling the wrap mortgage to payoff the lien (that you owe if you were the seller on a wrap).

Probably 80% of the notes we buy we have a payoff to an underlying 1st lender where the seller on the seller financed note still owes money to a bank from when they bought the property. Once that payoff is made the wrap mortgage moves to first position. 

A wrap does NOT remove the risk of a due on sale clause being exercised by the 1st position lender.  It just gives a layer of protection to the property seller that they don't get with a straight sub to (without a wrap).

The other option is to encourage or help the property owner go and refinance.  As mentioned, that is not in your control.  But selling the wrap mortgage to a note buyer is in your control.  It is very important that the Wrap Mortgage is written at market terms using a knowledgeable attorney, an RMLO, and a servicing entity.

These have risk and I'm not saying a new investor should go out and do them.  My view is there is more protection on a wrap than a sub to and with the right disclosures and underwriting can be an alternative option.  I don't like a straight sub-to.  It is why it was first on my top 5 of current risks.

Feel free to DM me and I'll send you my 10 Tips for Wrap Mortgages along with a video from an attorney that knows this stuff. I've been at this since 1988 and have seen them go wonderfully well and horribly wrong. My mission is to have people use creative financing  safely, ethically, and legally.

@Tracy Z. Rewey: So, if someone takes over a $375,000 mortgage using SubTo on a property worth $400,000 and turns around and sells the property for $405,000 on a Wrap mortgage with a Note of $405,000 (full value) to someone else, he now has paper, not a house. 

Let's say things go wrong down the road, any profit from the Wrap has been spent of course, the DOS gets called. How much can he sell the Wrap mortgage for to an investor?

What is the discount on the Note and how much are closing costs?

Wouldn't the Note would have to sell for nearly 100% to cover the Due On Sale? How likely is that?

@Don Konipol Any thoughts?

@Chris Seveney: Is that a note you would buy?

@Ken M. Great question. That is the kind of wrap note that would be a miss in my book. If the property is worth $400,000, a note buyer will base their maximum ITV Investment To Value on that value. The first alone in your example is at a 94% LTV Loan To Value ($375,000 1st divided by $400,000 value) and the wrap mortgage is underwater at 101% LTV ($405,000 divided by $400,000 value). I'd be a pass. We want to see equity, seasoning, a quality borrower, and good terms. We also buy at a discount (pricing depending on those qualities). I don't know any note buyers that would fund enough to payoff the underlying 1st in that scenario.

Quote from @Ken M.:

Quote from @Tracy Z. Rewey:

@Tracy Z. Rewey: What is the solution for a Due on Sale call when you buy using SubTo and sell using a Wrap?

Great question.  That (and insurance issues) are two big risks. All fancy footwork and tricky strategies aside (insert sarcasm)... the ultimate solution is to pay it off if it gets called due. 

It is one of the reasons I like a Wrap Note and Mortgage (or Deed of Trust).  If created correctly, it could be sold (in full or part) to a note investor that would payoff the underlying 1st from proceeds when they bought the wrap note. 

The other way to satisfy is to get the property owner to refinance but that is not always in your control.  With a properly written and qualified wrap note the seller of the property (that is the holder of the wrap note) still has an interest and an asset they can sell. A good attorney, RMLO, and servicing company play a big part of this.

.
@Tracy Z. Rewey: Your Comment: "the ultimate solution is to pay it off if it gets called due."

Hint: Once you sell a property on a Wrap, it is no longer yours to sell or refinance.
So, are you saying "you pay off a property you no longer own" out of pocket?

How do you call a performing Wrap due, in order to cover the Due On Sale on a property you did a SubTo on if your buyer is within his rights on the Wrap?

Put another way,
1. You buy a property SubTo 
2. You sell the property to someone on a "Wrap"
3. The lender finds out the property has been sold, twice now, and exercises their rights under the Due On Sale and gives you 30 days to correct or they go to foreclosure.

What happens?
What do you do?

Hi Ken, You are right you no longer own the property when you sell on a wrap.  You now own the mortgagee's interest in the wrap mortgage and note (or the beneficial interest in the all inclusive deed of trust).  You are collecting payments on your wrap note and mortgage from the owner of the property and sending on some of the payment to the underlying lien holder (or better having your licensed servicer do this).

What you have to sell is the wrap mortgage to a note investor.  When note investors buy the rights to receive payments on the wrap mortgage, we will payoff the underlying lien out of proceeds. 

You are not selling the property.  You are selling the wrap mortgage to payoff the lien (that you owe if you were the seller on a wrap).

Probably 80% of the notes we buy we have a payoff to an underlying 1st lender where the seller on the seller financed note still owes money to a bank from when they bought the property. Once that payoff is made the wrap mortgage moves to first position. 

A wrap does NOT remove the risk of a due on sale clause being exercised by the 1st position lender.  It just gives a layer of protection to the property seller that they don't get with a straight sub to (without a wrap).

The other option is to encourage or help the property owner go and refinance.  As mentioned, that is not in your control.  But selling the wrap mortgage to a note buyer is in your control.  It is very important that the Wrap Mortgage is written at market terms using a knowledgeable attorney, an RMLO, and a servicing entity.

These have risk and I'm not saying a new investor should go out and do them.  My view is there is more protection on a wrap than a sub to and with the right disclosures and underwriting can be an alternative option.  I don't like a straight sub-to.  It is why it was first on my top 5 of current risks.

Feel free to DM me and I'll send you my 10 Tips for Wrap Mortgages along with a video from an attorney that knows this stuff. I've been at this since 1988 and have seen them go wonderfully well and horribly wrong. My mission is to have people use creative financing  safely, ethically, and legally.

Great post! @Chris Seveney

Quote from @Nathan K.:

Hopefully you guys can help answer this for me......  So my question is this, how do I find seller financed deals?  The few people I've talked to don't really have good opinions on it.  Is there a website with just seller-financed listings that I'm not aware of?  Thanks. 

Great question.  I've worn three hats in the seller financing world (as a property buyer, as a property seller offering terms, and as an investor that buys seller financed note). 

We track the stats every year and last year there was $28 Billion in seller financed paper recorded across the U.S. That lets you know it is out there and it can be done! 

Now how to target what you want?

One strategy is to pursue properties (in your preferred markets) that have been listed for sale for over 90 days (even longer is better). These sellers might be more open to offers to accept payments over time.  It also helps to show them the amount of interest they can get when they add up 30 years of payments (compared to the sales price).

Quote from @Jay Hinrichs:

Quote from @Tracy Z. Rewey:

WE used AITDs in the early 80s agree this is the safest way to do these.. Of course we did not wrap conventional loans only private mortgages that had no due on sale.. We did hundreds of them.. 

They are still alive and well.  We are also seeing an increase due to the lower interest rate debt out there in a higher interest rate environment.  Nothing like the rates in the 80s though! 

Completely agree it is better to wrap private debt without due on sale clauses.  Most of what we see now for underlying debt has the due on sale clause. As note buyers, we like to pay it off out of proceeds or be prepared too if the lender exercises their option to call it due for transfer.

@Tracy Z. Rewey: What is the solution for a Due on Sale call when you buy using SubTo and sell using a Wrap?

Great question.  That (and insurance issues) are two big risks. All fancy footwork and tricky strategies aside (insert sarcasm)... the ultimate solution is to pay it off if it gets called due. 

It is one of the reasons I like a Wrap Note and Mortgage (or Deed of Trust).  If created correctly, it could be sold (in full or part) to a note investor that would payoff the underlying 1st from proceeds when they bought the wrap note. 

The other way to satisfy is to get the property owner to refinance but that is not always in your control.  With a properly written and qualified wrap note the seller of the property (that is the holder of the wrap note) still has an interest and an asset they can sell. A good attorney, RMLO, and servicing company play a big part of this.