Sub2 And Options?
I have a meeting with a seller (FSBO) on Friday and had a question that would alleviate some of my curiosity. I really need the answer before the day is done. When buying a house Sub2, can you use an option to tie up the property before taking the property Sub2? Example:
ARV = 100k
Balance = 71k
Arrears = 0 (homeowner just wants out)
fix-ups = 2k
Can I sign option at 78k (45day exclusive) and flip property to rehabber or another homeowner (with qualified loan ready to buy) and sell property for 90k and still close with a little $CASH$ ( NO OFFENSE Mr. Locke)?
SURE! You can get any property under contract with an option to buy. If you have the rehabber in mind and/or the person who is going to buy it from you lined up - it shouldn't be a problem. 45 days isn't a long time to line someone up...
Good Luck!
[addsig]
MadMax,
No offense taken, Matty gave you the answer, try for a 60 day option this will give you the time to execute your plan.
John $Cash$ Locke
[addsig]
Thank You both for your quick responses. Means alot. Last question. I keep seeing on this board and others that when doing Sub2 you are better off using the infamous "Land Trust." Well as you know I live in La. Any truth to that statement Mr. Locke, or could I still take Sub2 without the use of Trusts. My plan of action with this property is to tie it up (45 - 60 day option), and either buy sub2, assign it, wrap it, or straight sell. Any suggestions?
Sounds like a good plan. Before--and after--you leap, be sure you decide on a cash/bank$ buyer who needs few/no contingencies (like selling their current house before they can close with you), as they can really mess up your time table.
Make sure the homeowner is fully aware of what you're doing--and is OK with the 45 days delay--and that their credit may be tied up awhile since their name will stay on the loan if you end up Lease-optioning for a couple of years or selling on terms. If they're already in trouble, this may not matter, but if they plan to get another house, they'll be mad at you when they can't because they still have a loan in their name. With no arrears, this may be the case.
Not to speak for Mr. Locke, but while his course mentions trusts, he's more than proven that it's not a requirement to do sub2--not sure if one of his deals ever used a trust.
And loon is not 100% correct: the person whose mortgage you took sub2 can still get a loan in most cases, as long as you provide any paperwork the new lender would require showing that your seller is not responsible for the payments (copy of contract and/or the deed, cancelled checks from you/your buyer on the property, a completed HUD-1 from your sub2 deal, etc.)
On the option, you may want to be prepared to pay some kind of fee for the right to hold off purchasing (at least I'd ask for one if I was that FSBO guy...).
Andy