Thread: Buying homes "Subject-to"

Of course the lenders call the note due, otherwise their title insurance is invalid. If the lender has actual knowledge of a transfer of title and fails to act, the lender's title policy is void. There is no way to avoid the due on sale clause, only ways to hide the transfer.

As to the mortgage/rent skimming, TMG, please explain what felony has occurred if someone "buys" a house subject to a note, rents out the house, and never makes a payment.

So the bottom line is that anyone who does these types of transactions is subjecting themselves to a possible lawsuit by the bank?

Let's put it this way: if they tell you they are being honest with the bank, they are not being honest with you.

Info for you here
The truth about getting around due-on-sale clauses by John T. Reed

Originally Posted by prs

Info for you here
The truth about getting around due-on-sale clauses by John T. Reed

A fairly comprehensive explanation of exactly why these transactions don't pass legal muster.

Correct

JtReed.....
Biggest, nevermind. He's not exactly the best guy in the world on RE investing....

As far as being 'fair' & 'legal', a Sub2 deal is completely legal when done right.

Originally Posted by ME

Nuts & Bolts of Sub2:
1. Original Owner (OO) puts property into their trust.
2. Quit Claim (QC) Beneficial Interest of Trust to new Beneficiary (once payment (if any) are made by New Buyer).
3. New Buyer puts someone else in property at higher amount/down (ie - $10k down, $1500/month/200k sale price when original note/mortgage is at 180k).
4. OO is happy to get out or get money from transaction with credit being saved - as long as payments are being made. They must be motivated enough.
5. NB sells making money on the downpayment/monthly cashflow/final sales price down road (12-36 months+).
6. Profit?

There are lots and lots of 'in betweens' that go in these steps to change up the structure of handling Sub2s, but I won't reflect on them much - like the owner is STILL an owner of a percentage of the property in the Trust, NEVER violating the DOS.

The issues of Rent Skimming (RS) can be considered fraud, but each state determines what fraud is in relation to Rest Skimming. If someone takes over Sub2 on more than one house and fails to pay the mortgage, then an State Atty Gen might come after them with charges. A local County Prosecutor will leave them alone....depends on the value of the fraud committed and if they are looking for a re-election.
RS - taking the money BEFORE paying the mortgage/note on the property. Now if you can show you were using that money to maintain or fix up and still not pay, it will not generally be considered rent skimming. See above as to when/why. Using the money for personal gain would be frowned upon. RS is a gray area determined by the court when it gets down to it.

I've known some very wealthy investors rent skim and nothing be done to them because their attys said it was fine....and kept any questions/prying eyes away from financials.

EDIT: And if anyone wants a much better explanation on ANYTHING RE related, go hit up creonline.com - I've been there for 10 years or so and have thousands of posts in my RE investing venture.
Here's an response from a REAL atty...one who JtReed crucifies in his writing, but fails to give you all the information in his editorial: http://www.creonline.com/beat-the-du...le-clause.html
Did I mention that JtReed is NOT an atty? Huh, who would have thought?

Originally Posted by TMG

As far as being 'fair' & 'legal', a Sub2 deal is completely legal when done right.

If by "done right" you mean informing the lender that beneficial interest has been transferred, then OK. LOL!

Originally Posted by TMG

And if anyone wants a much better explanation on ANYTHING RE related, go hit up creonline.com - I've been there for 10 years or so and have thousands of posts in my RE investing venture.
Here's an response from a REAL atty...one who JtReed crucifies in his writing, but fails to give you all the information in his editorial: How to Beat the "Due on Sale" Clause
Did I mention that JtReed is NOT an atty? Huh, who would have thought?

From the scumbag you linked to: "Keep in mind that the assignment of Sammy Seller's interest under the trust to you does trigger the "due on sale," but who is going to tell the lender?"

What is the benefit of doing this as opposed to:
-getting a vendor take back at a good rate
-taking clear title to increase your asset portfolio, which can be used as leverage in the future
-renting it out

I don't understand the benefit in "Subject-to". I'm not knocking the process, I genuinely don't understand it.