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1st Deal - Sub2 - Need Help

SubjTo profile photo
  • Saturday, July 10, 2004 @ 01:42 AM EDT
  • 10 Comments

Hello All!

As this is my first deal, I want to be sure I’m headed the right direction and ‘CYA’ as well as possible. This is a pre-foreclosure that we’ve gotten pulled from the auction and now are looking to buy sub2 existing financing. Dallas, TX

Here’s how I understand the process & req. documentation:

1. Seller signs Contract stating that Buyer (me) is taking over payments for their existing loan and Seller gives all ownership to Buyer at closing. [copies - Seller & Buyer or just Buyer?]

2. Seller signs Loan Auth stating that Buyer has permission to research mortgage info [copy - Buyer]
a. Dbl check all info w/ mortgage co
b. Title Search

- Closing -
3. Seller signs Property Deed to Buyer, and/or Assigns (property is now legally Buyers) [ copy – Buyer]
a. When/How to use Land trusts? ( I know this is a big question, but I’m unclear wink)

4. Seller fills out Property Disclosure giving current state of property (termites/lead paint/etc) [copy – Buyer] – TREC Form OP-H

5. Seller signs Limited Power of Attorney – stating that Buyer can sign for anything regarding the property [copy – Buyer].

- After Closing -
6. File Deed (nothing else) w/ County Courthouse ( now property is officially & legally yours )

7. Do Repairs & Sell / Rent / Lease-Option

:-? Questions:
* What did I miss? Are there any gotchas in what I have outlined?

* Do/should I use a Title Co to do the closing?

* If not do I fill out the HUD-1 myself? (where can I find an example?)

I know that many of you like the numbers so here are the details:

Code:


ARV:    110 – 115k

Bal:	~70k

Repairs:	< 5k

Back pmts: ~ 3k


Thanks in advance! :-D[ Edited by SubjTo on Date 07/09/2004 ]

Comments(10)

  • no photo
    myfrogger30th June, 2004

    I think you are good to go as far as the sub2. I don't know much about land trusts and would like more info too.

  • no photo
    samedwin1st July, 2004

    I think if this is your first deal you dould DEFINATELY use a Title Co. They'll take care of you and your interests. They'll do the deed correctly, and ensure the HUD is correct, and the Title is recorded. It'll also build credibility with your sellers; rather than meeting at Taco Bell to close. (John LV if your're out there, HA!)
    Best of Luck
    Sam

  • no photo
    summerj1st July, 2004

    It sounds like you have the core documents lined up for "subject to" but you left out a few important ones:

    1. Authorization for Insurance (A release from previous owner for future insurance claims. (Policy still stays in seller's name but gives you permission to collect any claims.

    2.Change of mailing adress.

    3. Power of attorney. (this gives you the buyer permission to sign any document in the sellers name for this particular property.

    3.Hud 1 form ( I would have easy http://www.hud.com fill this out I have not userd them yet but someone else on here recommended them)
    4. Due on sale CYA letter
    5.Mortgage company letter Signed by seller.

    By the way I am pulling all of this from John "Cash Money" Locke's manuel which has helped me tremendously.
    He has all of these forms in his Manuel
    Best $89 bucks that I have spent to date.


    Best of luck,


    Jim

  • no photo
    SubjTo1st July, 2004

    Thanks guys!
    Sam,
    This may seem silly, but what do I tell the Title Co? "Hey I'm taking over this guy's payments and need you to do the paperwork?" I guess my concern is not to look like a fool. smile

    Jim,
    Quote:Mortgage company letter Signed by seller
    - what does this say?

    * $89 sounds pretty reasonable, can you post a link?

    Thanks again!

  • JohnLocke
    JohnLocke1st July, 2004

    Jim,

    I understand from a PM to me you need this paperwork quickly, I tried to PM you back with the information, however I do not think the PM's are currently working.

    I have left a message for Joel to contact me ( I know he is busy adjusting the site) to give me information on how to contact you so you can be brought up to speed quickly on this deal.

    Otherwise search me John $Cash$ Locke on what else to do.
    [addsig]

  • no photo
    MadamRealEstate1st July, 2004

    Do you ever get the underlying lienholder's ok on this? Or is this a part of the plan to bypass the lienholder? What about DOS clauses? Has anyone ever thought about the loan that is in foreclosure and the bank won't accept anymore payments? What do you do in a case like that? What if you default on the loan, and the seller is still on the loan....is he doubly screwed? Why is it not better to just buy the property with a new loan and pay the seller's lender off? And what about judgment liens and irs tax liens that usually go hand in hand with a seller who is having financial difficulties? Do you pay those off before you take subject to? Do escrow companies actually close these transactions without clear title reports?

  • JohnLocke
    JohnLocke1st July, 2004

    MadamRealEstate,

    It seems you are posting just to be argumentative, so I have advised you to post to help, not flame the fires of if you aren't a realtor or real estate agent then you are taking deals aways from us and all creative investors don't know what they are doing.

    So you want to dance, be prepared to have your dancing shoes on, cause the cashman is coming.

    John $Cash$ Locke

  • no photo
    SubjTo9th July, 2004

    I'm in Texas, so my questions are slanted to any state specifics. smile

    What all is included in the John $Cash$'s manual?
    - examples of forms? different state specific forms? or generic forms?
    - Anything to do with land trusts?

    About the 'Authorization for Ins', I have seen other postings stating that if the seller does not still reside in the dwelling, (vacant) then an existing policy would not pay any claims. - Is that true?

    As far closing w/ a title co, do they care that it is a sub2 deal? Do you just come out and tell them? - worried they will contact lender.

    What does the Mortgage co letter say?

    - and my final question!

    John - How much longer are you going to offer the manuals as a product seperate to the course. (saw another post that you are planning to stop selling the manuals seperate.)

    Thank you!

  • JohnLocke
    JohnLocke9th July, 2004

    SubjTo,

    I believe the response you are looking for since you are asking state specific is I have a student in Houston who has my material and is on his 5th Subject To deal after 1 1/2 months. The reason I mention him is because we talked on the phone today.

    I am not one to have a "firesale", "scratch and dent sale", "over stocked sale" etc., I value my time with my students and their investment in me to much, to pull the "only 5 left get them now deal".

    What will happen with my manual is that it will be pulled from my products list and the announcement "that's all folks".

    A time frame would be when my current supply is diminished, which I cannot predict the day, but I will say it will be very soon.

    John $Cash$ Locke
    [addsig]

  • no photo
    jumperdk110th July, 2004

    to try and answer your question about land trust. when you close on the prop. you should have the attorney set up a land trust and make the sellers the benificiary of the trust and make youself or a friend the trustee of the trust and then in a sep. unrecorded document have the sellers sign over their benif. rights to your llc so this way you now have the benif. rights and you are also the trustee. this is only if you want to make sure that you are extra safe from the DOS. hope this helps, Ryan

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