Subject To And Insurance
Reading the archives I think I see discussions of two different approaches to insurance and a subject to, the issue being that a change in insurance beneficiary could put the lender on notice and he would invoke the Due on Sale clause.
(1) Create a trust with the hope that the lender will think it is a living trust for tax planning. Take the insurance in the name of the trust.
(2) Leave the existing insurance in the name of the old owner and obtain a power of atty from the old owner and file a change of address with the insurance company.
Of course the third alternative is to take new insurance in your own name, specifying that it is a rental property.
Can anyone discuss his or her experience and preferences?
An obvious problem with (2) is that if the old policy is a homeowner’s policy then you may not be covered. Am I right?
I see a lot of very vigorous assertions that lenders just do not call their DOS clauses. If that is the case, are there people here who just take the insurance in their own names? If so, have you had problems? If not, can you tell us the lenders involved, since this may be a lender policy difference.
Thanks
Carol
Let me speak first of my own experience about insurance and Due on Sale.
We sold a property on Contract for Deed. The couple that bought the property took out a complete homeowner's policy (not renter's) on the property. The insurance company forwarded their policy to the lender in place of my Landlord's policy.
The lender was Countrywide, who is supposedly notorious for invoking the DOS. The buyers were late several times with the insurance payments with notices sent each time, however I didn't here one problem from the lender about it (except for the standard "we supply our own insurance if you don't" letter).
The point is that while the DOS is a possible risk and should have a plan for dealing with it, the fact is that the lender will usually not enforce it UNLESS something is done that they feel puts their position at risk.
As far as the insurance goes, if you don't want to switch it into your name, have the seller change it to a landlord's policy.
NOTE: this too could have problems since, using SUB2, the original seller will no longer be the owner of the property. If the paperwork is not handled correctly, this could give the insurance a possible stance for not paying on a claim.
Roger
Risk is goood .. Risk is profit and success...
Okay, I have personally taken out new policys in my name and the insurance company does notify the lender and provide proof of the policy to the lender..
I don't give a hoot. My attitude when working with lenders is take it or leave it.. If they want to foreclose they can, though I have NEVER had a lender foreclose (call a dos) because thats exactly what there doing if they tryed to call a dos, in theory it's a bluff to get you to cash out the lender..
Aside from that, tcinvestor has many active investors posting and many members nationwide.. I have yet to hear, read, see or otherwise know of any 'horror' story of a lender even attempting to call a dos.. They only care about there money, i.e. payments!!
And I think they respect an investor who is too the point and up front, not sneaky, slie, etc.. Get a policy in your name, make your payments on time, and let the lender know there investment is performing and protected, you'll have no problems..
That's all folks.. My 2 cents and then some..
Chris,
I have been asking this question for months and recently got an answer from Lou Brown “the trust guy”. He said issue a new landlord insurance policy in the name of the trust and trustee and name the beneficial interest as ATIMA (as their interest may appear). He said this would cover any claim by the insurance company.
Beachboy
PS I have done insurance on subject to’s all three ways described above and have not had any problems with the DOS clause.
Beachboy
I'm confused. please forgive me.
I'm picking up my first property sub to and I'm taking the property into a Land Trust with the LLC as a beneficial interest. So how do I handle this insurance issue?