CFD Vs Subject To
Why do lawyers have to make things harder than they should be?... Oh yea THATS THEIR JOB!
I have been working on a sub to deal for about 5 months with two marrried lawyers (they listed with a realtor and then came back to me) Well they hired another lawyer to come in and find flaws in my sub to deal. They instead want to do a contract for deed becuase it is less risk on their behalf.
I do not know much of the difference and could use some help with any articles
The terms so far are a CFD for 3 years. What is common for an Investor to ask for in a CFD
Rob Carroll
One of the things that I would ask for is "Non recourse" meaning the property is their sole recourse.
With Sub-2 you actually get the deed to the house. It's yours. CFD sometimes called a Land Contract (at least that's what they call it in KY). In CFD, you get the deed when you fulfill the requirements for the contract. So in your example, you'll get the house in 3 years. Till then, you're making payments or whatever the contract says you have to do to get the deed.
When you have a choice, ALWAYS GET THE DEED. If you do CFD, MAKE SURE YOU RECORD IT!!! Or they can sell without you knowing or being involved in any way whatsoever, and then you're out.
You can still make $ in CFD, just CYA by recording the contract. Make sure you're payments are lower than you can get for it when you resell with owner financ. or whatever you plan on doing.
Get creative, tell them if they want to do CFD, no problem, but they'll be resonsible for the taxes on the house, since the deed is in their name. If you take Deed to the house, you'll be responsible for the taxes. A couple thousand dollar way of leveraging and getting a deal either way....
Anyway, good luck.
Sam
Personally, I wouldn't do it. They are correct, a CFD gives them more protection, and if you do it, definitely get it recorded, because it gives you less protection.
I follow a general guideline, if it's good for buying, it's generally not good for selling and the opposite applies too. Lease options and land contracts are good selling methods but generally, have too much risk and possible legal consequences when buying.
Here would be my stance. You're an honest hard-working RE investor. While you can understand their concerns, its not in your best interests to try to "screw" people. If they are concerned about the payments being made, setup a neutral third party to handle it (like an Loan servicing company). If they are really concerned, you could sign a promissary note or even a 2nd deed of trust/mortgage (junior to the original) with them as the lienholder. IF you fail to make payments, they can foreclose.
Bottom line, though, is that they called you for help, which was to sell their property quickly. This is your solution to the problem. Get the deed.
BTW, with them both being lawyers, I'd definitely dot all i's and cross all t's. If it goes bad, they'll be like wild beasts over those contracts. If it goes good however, you'll probably have some really good sources for future leads.
Roger
Roger,
I have offered those things. Thier MAIN concern is something happening to me i.e. company going default, death, whatever. They just want to know they can get the home back if I dont meet my end of the deal.
I explained to them that If I have to sell blood to make their payments I will.
I have 8 other homes and no problems at all but I have only been doing this less than a year and that scares them.
The way I see it is I have 3 years To find somebody to Lease purchase their home. In the meantime the PITI is $875 a month and I can easily get $1150 to $1300 a month. (I know this cause I have a home right down the street.)
The worst I see happening is the home going back to them if I cannot sell it within three years.
Okay, if you offered them a promissary note, or a 2nd lien, they can get the house back if you stop paying (which I think you would if you died, right ) so I don't see the problem there.
You're last statement bothered me, though. If you are buying subject to, then you're getting the deed. These people won't own anything but the lien against the property anymore. There is no "getting back" the property with a subto deal. YOU own the property and are responsible for it.
Furthermore, while I hope you're making no promises as to the timeline for getting the loan out of their name, if you're telling them about 3 years, I'd do everything I could to hold to that, even if it meant refinancing into your own name.
Again, bottom line, you've made your offer. They can now accept it or not. Don't fall in love with the deal.
Roger
Its good advice and its what Ive been taught. This home is not going to make me or break me.
Lets say I do die or defult on the promissory note how would they go about getting the deed back into their name?
I never give a time frame on Sub To deals but again if I do it the CFD way the worst I see happing is me leasing the home out for 3 years to somebody, making 200-300 a month off it and if it does not sell handing it back over to them.
The value of the house has been increasing about 8-9 grand a year. The neighborhood is desirable. The homes on each side of this one have sold in the past five months. They are cookiecutter houses Really not sure why this one has not. I do know they have had some crappy realtors.
Rob