"Subjetc To" Questions
When buying a hse Sub to - how does the deed get transferred? Do you have to involve a title co.?Are there any 'closing costs' associated with this transaction? Do you assume ownership immediately? what about the taxes and insurance if the loan is in the other person's name? What about if there is a lien on the property?
I need help on this because I am thinking that it is probably the best way to get into a property that I'm talking to someone about. I aim to keep it as a rental and this person is desperate for quick cash to prevent another property she owns from foreclosing.
So my proposal would be to take over the existing financing because the property is already rented, give this person the small amount she needs as a down payment for this property and have her hold the balance between my offer and the original loan amount as a second mtg payable in 24 mths with interest only payments.
Any help would be highly appreciated. Thanks in advance
Hi shikely
To start out with “Subject to” investing you should check out these 2 articles:
http://www.thecreativeinvestor.com/modules.php?name=News&file=article&sid=146
http://www.thecreativeinvestor.com/modules.php?name=News&file=article&sid=266
and then the Sub to forum:
http://www.thecreativeinvestor.com/ViewForum34-1939.html
Hope this helps
John (LV)
I would also recommend reading every post in the forum as sometimes the posts get off the track of the original question and offer some great advice and information along the thread. Good luck
My title company thinks this is "illegal" so I do not use them. I get the deed (and affidavit of value, needed in my State) and have them signed and notarized. I get a POA for the property, an authorization to release form. The taxes and insurance, which are often escrowed and sent in with mortgage payment can be negotiated, along with other items. I take the deed and affidavit, and have them recorded. I get another insurance policy on the property, leaving the existing policy in place. I have the owner sign a DOS form, saying they know the loan can be called due. And I have them sign Joe Kaiser's Best Darn Doc, which say that they understand all terms, weren't coerced or under duress, or drugs. They move out. I then pay them any money that we had agreed on, and it is a done deal.
Thanks for the suggestions guys - just FYI to Locutus9 - it is not illegal and you need to get yourself another title co. man.
I am just wondering whether to have the owner do a quit claim deed or actually have a title company run title and do a proper warranty deed with the "subject to" on the deed.
Is it easier for a corporation or an individual person to get financing? I know it depends on credit but which do lenders look at more stringently, if any? Thanks again guys
Quote:
On 2003-12-21 14:08, Locutus9 wrote:
I get another insurance policy on the property, leaving the existing policy in place. I have the owner sign a DOS form, saying they know the loan can be called due.
One concern of carrying 2 policies on the same property is that most policies have "excess" clauses. In other words the policy will pay only excess amounts, if any other policy exists. If each of the 2 policies have such a clause it will create havoc in getting a loss paid...
Here is the hypothetical:
Property has a "homeowner" or "tenant" and a "landlord" policy (both) on it. Fire occurs. Owner files a claim under the landlord policy. So far, so good. However, "tenant" (may or may not be prior owner), has personal property damage. He must also file claim, but against his "homeowners" policy. The respective insurance company on each claim is bound to find out of the other policy's existence and could (more than likely would) attempt to invoke the "excess" clause of it's own contract, potentially leaving the owner waiting for courts/arbitration to settle...
There should be an article I wrote regarding insurance and the subject to scenario soon. Hope it/this helps.
[ Edited by norrist on Date 12/22/2003 ]
since there's only 2 months of coverage left on the current insurance, I will wait until it expires then purchase a policy of my own. Since the current mtg payment only covers princpl &Int., the bank has no role to play here.
Quote:Property has a "homeowner" or "tenant" and a "landlord" policy (both) on it. Fire occurs. Owner files a claim under the landlord policy. So far, so good. However, "tenant" (may or may not be prior owner), has personal property damage. He must also file claim, but against his "homeowners" policy. The respective insurance company on each claim is bound to find out of the other policy's existence and could (more than likely would) attempt to invoke the "excess" clause of it's own contract, potentially leaving the owner waiting for courts/arbitration to settle... norrist,
Landlord policy covers building and structure and landlord's personal property if provided for tenant's use(e.g.,washer/dryer). Tenant policy covers tenant's personal property. Since there is no duplication of coverage, how does the "excess" clause apply here.
Let's add another wrinkle. I am the landlord owner of a condo unit. The condo association has a master insurance policy on the structure. I have a landlord policy for liability and replacement cost coverage on any personal property supplied for the tenant's use. The tenant, by terms of the lease, is required to purchase his own tenant policy to cover his personal property. With three policies in play, again with no duplication in coverage, what issues would the "excess" clause raise for the landlord-owner.
Q:When buying a hse Sub to - how does the deed get transferred?
A:The seller should deed the property to you or your trust.
Q:Do you have to involve a title co.?
A: No, depending on your level of experience, you can take title yourself in front of a notary if you like.
Q:Are there any 'closing costs' associated with this transaction?
A: They can be as little as the cost of fiming the deed up to the amount that your attorney will charge you for a regular closing.
Q:Do you assume ownership immediately?
A: As soon as the deed is delivered, you (or your trust) own the property.
Q:What about the taxes and insurance if the loan is in the other person's name?
A: If they are escrowed, the tax statement will still go to the mgt co and be paid by the lender. You will get a statement at your address if you filled out the change of address for the mgt statements. The insurance is another story all together and I think that has already been covered.
Q:What about if there is a lien on the property?
A: When you buy sub2, you are buying subject to any and all liens currently on the property. Anything on it, goes with it.
William Tingle
WilliamGA
Quote:Q:When buying a hse Sub to - how does the deed get transferred?
A:The seller should deed the property to you or your trust.
Q:Do you have to involve a title co.?
A: No, depending on your level of experience, you can take title yourself in front of a notary if you like. WilliamGA,
We should note that this generalization may not apply in all states.
For example, SC is an attorney state (no title companies) and in SC, I can not record a deed that has not been prepared by an attorney. NC is an attorney state also, and may very well have a similar requirement..
I would have no choice but to involve an attorney. And while I am at it, I will also purchase owner's title insurance on the property and let the attorney document the settlement.
Dave,
I do not know NC law specifically but I can't believe that you can't record a deed that you prepared if you are a principal in the transaction.
GA is not a title company state either and an attorney has to handle all closings done as a 3rd party but you can still record deeds and handle closings if you are a principal.
As I am planning to move to that area in the next few years, I will have to check that out.
William Tingle
WilliamGA[ Edited by WilliamGA on Date 12/23/2003 ]
How would it work if I wanted to refinance about 6 months down the line? I am putting the property in a corporate name right now.
I am guessing it would be the same as any regular refi. Please correct me if I'm wrong.
This place has in excess of $60K in equity right now - how difficult would it be for a new corporation to, for example, get an equity line of credit on a deal like this? Does anyone know? Just thinking of pulling some cash out of it for future investment.
Quote:
On 2003-12-22 17:10, shikely wrote:
\Is it easier for a corporation or an individual person to get financing? I know it depends on credit but which do lenders look at more stringently, if any? Thanks again guys
Shikely,
Unless your corporation has a reasonably long and good credit and financial history, lenders are going to want a personal guarantee from one or more of the corporation’s principals. Unless you are already incorporated, you may want to look into setting a Limited Liability Company (LLC). From my checking around this seems to be a better, definitely simpler (Corps can be a pain in the arse to maintain), way to hold property. Also, consider setting up a separate LLC for each property you own. I am in the process of doing this right now.
Refinancing would go just like any refi of any property that you own. Barring seasoning issues from your lender, there should be no problems.
With regard to title in a corp name, again, this will be lender specific. Some lenders will not refi if it is in a corp name. They will want title to be in your name before the deal closes. No biggie, the corp can deed to you to close and then you back to the corp although this does negate privacy if that were any consideration.
Your lender will probably also want you to sign personally if they do agree to let you refi in the corp name.
As to the LOC, again, depends on the lender. Unless you have quite a track record so far, I would say the chances are slim though.
William Tingle
WilliamGA
Yup, this is a new corp - so that removes the track record from consideration. About personal guarantees, I can live with that - no problem!!! Just figuring out the best, least inconvenient way to go about it, that's all.
I would, at some point of time, tap into that equity that I will have - so I just have to find a lender willing to work with me.