"Subject To" Beginner, 1st Deal
Well, I just started reading the post on "subject to" about a week ago. Today, I completed my first deal. It is not going to be a huge money maker, but should be a quick turn around. I probably made a few mistakes(titling property in my name) but hopefully I will survive.
Reinstatement was a few thousand higher than anticipated, but all should work out.
I have yet to deal with the insurance and would like to know if I can simply add my name to the existing policy or if I can have the previous HO's name removed and add mine?
Thanks
What about putting the property into an land trust? Then having the current owner name the trust as the co-beneficiary. When you set up the trust you or your entity would be named as the benefiaries. That should get them out of the loop, avoid due on sale, etc.?
Just a thought
Contact the insurance company and ask to change the policy to a landlord or commercial policy stating that you are to be added as an "additional insured" to the policy. We usually fax this request to the existing insurance company. Be sure to include information that gives them your contact numbers if they need to get in touch with you. Sometimes we are told by the insurance company (who is the agency handling the property that we took "Subject To" that the company doesn't write commerical policies. We contact OUR insurance company and ask them to insure the new property.
I have hit my first stumbling block, called the insurance company and they will not add me to the policy. Said they must cancel the policy if house is no longer owned by the same person. My reinstatement obviously paid the insurance and now the seller will get a refund check. The problem is now I must start a new policy, the mortgage company will see the old policy is canceled and a new policy will have to have my name on it since I titled the propoerty in my name.
Any suggestions?
jllaco
Glad to meet you.
You broke some of the basic fundamental rules of Subject To investing.
You through up 'flaggs' everywhere, the lender is not going to be thrilled at what happened.
You need to contact the old owner and have them put a new policy on the property 'quickly' and then leave it alone for right now.
I would like to ask what else happened in this deal, but I have a feeling we will all find out shortly.
Do not contact the insurance company!
Do not contact the lender!
Make sure the payments are made on time, do a simple change of address to the lender and live happily everafter.
One more thing have your paperwork reviewed by an attorney to make sure it conforms with your state statutes. Of course I don't have to tell you this I am sure you did it.
John $Cash$ Locke
The insurance company said that I am not covered under the current policy, effective the date the deed was signed over. The policy is not canceled yet(to my Knowledge). Mortgage company does not know anything yet.
So, was the insurance rep incorrect, am I still covered under the exisitng policy in the original homeowners name? Do I need the original homeowner to sign anything in this regard?
Thanks
the deed transfer was performed by an attorney, so all paperwork was completed and filed. Agree that I may have made some errors or over simplified the process resulting in some risk. I feel fairly succesful, though. I found out about this property, researcehd, contacted the owner, worked out deal and closed, all in one week on my first transaction of this type(closing 1 business day prior to the foreclosure sale). Not affraid of making mistakes and hope to learn from them and with help of those who have already had the same experience. Thanks for your help and comments(good or bad)!!
jllaco,
I am glad to see you have a positive attitude. Learning through your own experience howerver, is sometimes costly. There are folks here who can help you but after the fact it is a little more difficult.
The insurance could send a 'flagg' to the lender that a tranfer has taking place, this is why it is critical that you make sure insurance is in effect.
I would have your seller get new insurance if there is any possibility that the insurance is going to be cancelled. The lender will put a new policy on if they see it has been cancelled but you won't like the premium amount, sky high.
If the sellers current insurance people know, which I believe you said they did they will cancel the policy in all likelyhood. So get with the seller and get it covered.
John $Cash$ Locke
My main concern is to be insured, I went into this purchase knowing the DOS could be triggered and I am not really concerned if it is. I have the funds to satisfy the loan. This was more of an experiment with a new type of purchase(for me). The interest rate on the loan is 9.25%, so if the mortgage company wants to pull that money in and lend it back out at 6.5%, so be it.
Should I get a POA from the previous HO?
jllaco,
Yes, a POA should always be part of the package you get from the seller.
I undersand the part about being able to re-finance he deal, however what is owed on the house and are you buying it for cosiderably below market value? Other wise you might just as well go pay retail for houses, this is what could happen to you in this deal as I am reading it.
It is ok to make mistakes, even I thought I did once, but I was mistaking about it. I am trying to help you salvage this deal without you having to come out of pocket anymore than you have to or already have.
Your attorney did not have you get a POA, poor decision in my opinon, what paperwork did your seller sign, maybe there is something else missing. Like a letter for Authorization for Insurance.
John $Cash$ Locke
Basically,all I used the attorney for was the deed transfer. No POA or letter of Authorization for insurance. I don't beleive the deal will go south, even if I have to pay out the 60k balance on the home. The MV is 90k and needs about 2k of work. Not going to get rich but new it going into this deal. Doesn't need much work and should be a quick turn around to make 12-15K, like I said, not a fortune but I have very little work to do and very little invested(unless DOS occurs). I don't think the deal needs to be "salvaged" just yet, I just want to get the insurance taken care of in the easiest fashion. I could just payoff the loan(avoid the 9.25% interest) and insure it under my name but that is not my goal. I want to learn what needs to be done to properely execute this this sale next time(ifit makes sense). What is the purpose of the Authorization for insurance and does it work in conjunction with the POA?
Thanks again John!
Hey John,
Congratulations, well done, once the insurance is in place. If the agent leaves the policy alone give it a little time and then add your name. If you don't have insurance authorization, Your previous conversation with the insurance company diden't exist, Right????
If there is anything else, John Locke's sub to book is cheap, woth the price for the forms in it.
Sub to deals are easy when the buyer is motivated . With this book you will close more deals with higher profit like clockwork.
Hi David,
Thanks for the help. I am sure I could get the Autorization signed, I am still helping the HO move out. Does it need to be signed at any specifice time? Would anyone send me an example of a Authorization for insurance and a POA for Insurance?(or point me in a direction to where I might find one) I'd like to wrap this deal up.
Thanks for the help!
Hey John,
Another route you might want to go is just get a new landlord policy from your insurance agent, make sure the bank is covered on the policy and send it to the banks insurance department to be escrowed. I have done this numerous times with no problems. At the larger banks the right hand doesn’t know what the left hand is doing. They just want to know that the bank is covered if a claim is filed.
Thanks,
Mark
Please tell me what a POA is?
Thanks.
POA = Power of Attorney
It is a legal document that allows you to act as the home owner's attorney/agent.
-Chris
[addsig]
[ Edited by abstractprone on Date 12/19/2003 ]
You kinda sound like me...I dived into my first Sub2 deal without knowing what the hell I was really doing. It worked out for me but it was definitely a costly lesson. I have sinced learned how to do Sub2 deals correctly and also less expensive. John Locke's Sub2 Manual/Course good help answer a lot of your questions and teach you the correct way to to Sub2. Good Luck!!
Quote:
On 2003-09-07 21:50, crf3boys wrote:
Please tell me what a POA is?
Power of Attorney
Thanks. <IMG SRC="images/forum/smilies/icon_confused.gif">
POA = Power of Attorney: a document, authorizing another person to act on the behalf of an individual/seller and binding that individual/seller to those actions.
Hello everyone....seems to me that title insurance is the "boogey man" of Sub to It's really not that scary...There was a post about Insurance a while ago that was very informative. The post was titled "Subject-To Insurance . . . Shhhh!" Posted: 14:06 on 11-06-2003..The part that was particularly interesting was a reply by Lufos...and I qoute...
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Posted: 22:00 on 11-12-2003
Gentlemen and Ladies.
May I suggest a really sneaky way of handling the problem.
An example;
Mr. Kenneth Jones, aspiring actor had an elderly lady give him a house with a nice big mortgage on it. The this was a PMTD created at time of sale. Mr. Kenneth Jones obtained a policy of insurance on the property all was well.
Mr Kenneth Jones plotched due to his inability to repeat lines and the house went delinquent. I bought the house from Mr. Kenneth Jones who returned to the Abbey Players in England where he could hid his lack of talent and memory behind a fake nose and pantaloons.
I examined the policy of insurance and sent a letter to the insurance company asking them to include another name as co insured person. I also sent a check which was blank. (limited not toexceed $200) They took the check and in due time I received a corrected policy. They filled in the check in the amount of you will never guess. Right on $200. A month latter I sent another letter to the insurance company informing them that Mr. Kenneth Jones was no longer in title and would they drop his name from the list of people they would be paying on any loss..
This they did and all went well for a few years until I paid off the loan with a refinance. At that time I received a lovely letter from the insurance company thanking me for my business and their best to Mr. Kenneth Jones. I also received a letter from the old Lender thanking me for my many payments, most of which were on time and oh yes a copy of the Deed of Full Reconvayance they had filed removing the old mortgage.
Seemed pretty easy, not too complicated.
Pensively Lucius
By the way Lufos hope you don't mind me quoting you but as a title co. employee I gotta say that IS a very "sneaky" way of doing things but quite correct. Thanks for that info.
abstractprone,
Glad to meet you.
On behalf of all the investors out their that help people out of bad situations I for one apologize to you for the way you were introduced to this great industry.
You always have the bad apples out there and many fields of endeavor have them also.
One of the first things we as investors should learn if the deal isn't right for everyone concerned then don't do the deal, it isn't worth a post like the one you just wrote.
I personally look for problems I can solve and not houses, this normally makes it a win/win for everyone and the house is a by product for me for solving the problem to everyone's satisfaction.
The best to you in the future.
John $Cash$ Locke
I, too, extend my apologies...
Although I have not done a deal (yet!), I know going into this that I will absolutely not do a deal unless everyone wins.
All of the authors I have come across (i.e., Bill Bronchick, Ron LeGrand, John $CASH$ Locke, etc) teach that an investor's job is to basically show the seller a solution and answer any questions that may arise--no pressure and NEVER lie (which should go without saying).
It is good you are here. You will find a ton of valuable information which should help you in the future.
[ Edited by Rogue on Date 12/03/2003 ]
crf3,
POA=Power of Attorney.
Basically you have the power to do whatever they had the power to do.
Hope this helps,
Sam