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  1. #1
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    Sep 2008
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    Default Buying property – “due on sale” bank clause

    Someone told me that I could buy a property “subject to” the existing loan. That the seller could just deed the property to me and I could take over the payments. Is this legal and what will the bank do when they find out? What about the “due on sale” clause? Can anyone help me on this. It sounds like an incredible way to buy property, but I don’t particularly want to go to jail.

  2. #2
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    Default Re: Buying property – “due on sale” bank clause

    Sounds like you would need to find out from a real estate lawyer or even a bank as to the details of this.

    I doubt the seller would be able to give you the title of the home if there is still a current mortgage outstanding .... without the blessing of the lender.

    It's possible you may be able to "assume" the existing mortgage with the lender from the seller .
    Simply put .... the seller would arrange with the lender for you to take over the mortgage if you qualify and would require transferring names on the paper work.



    Just a thought.
    "" an ounce of perception -- a pound of obscure "
    - Rush

  3. #3
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    Default Re: Buying property – “due on sale” bank clause

    Because a property owner does not have a clear deed if there is a mortgage on the property he can not deed it to anyone else. Withe a loan assumption the original loan is paid off and a new loan is established in the name of the assumer.
    Jack
    Be sure you live your life, because you are a long time dead.-Scottish Proverb

  4. #4
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    Default Re: Buying property – “due on sale” bank clause

    You are right – buying properties “subject to” is an amazing way to invest. I just started doing it 4 months ago and I already own 12 houses with positive cash flow plus I made between $4k and $10k upfront on everyone of them. Once you know how to structure the deals, the only trick is knowing what kind of lead to go after and how to market to them. It takes a little practice, but it’s really paying off and I’m finally getting serious about quitting my day job and doing this full time. And don’t worry about “due on sale” clauses, I work for a bank and they don’t foreclose on properties where the payments are being made – especially in this real estate market – they don’t need any more foreclosures. But don’t take my word for it, here’s a VERY long article on how to do deals like this. It was written by the guy that taught me. http://joecrump.com/secret.html

  5. #5
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    Jan 2008
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    Default Re: Buying property – “due on sale” bank clause

    there are two kinds of assumptions a simple assumption which does not release the original debter and the original note (the i.o.u.) and mortgage (the secured collateral lien) does not have a due on sale clause and a formal assumption which the original debter is released from the note and the note is assigned to the new buyer if the bank or whomever holds the note qualifies and approves the new buyer and agrees. in both cases there is no new morgtage written for the original one, instead ammendments and assignments are written and filed. sometimes the servicer will waive certain fees on formal assumptions if the original debtor was in trouble and they like the credit of the new buyer and dont want to have another foreclosure on the books.

    it is very rare to still find an original owner occupied residential only property with a mortgage and note that does not have a due on sale clause. when you buy a property subject to existing liens and such your ownership is after the interests of those that predate yours and remain unreleased. there are federal laws in place that govern some of these mortgages like those issued with FHA or VA loans, originally issued by national banks, and those sold to loan pools like fanny mae and freddy mac, as well as state laws for those issued by state chartered banks and the local laws about land titles and stuff.

    if you are considering this type of transaction you should consult with a local real estate attorney before you do anything and then have him or her review any and all documents and parts of the transaction before you commit to anything and have him review everything before you sign. if you don't do things right when the lender or servicer finds out that the title has been assigned they can call the loan and you can loose everything if you cant pay it off immediately. some states they can get you out even faster than they could an original debtor because of a due on sale clause. there has been a lot of stuff in the news about mortgage fraud and straw buyer schemes lately people have lost their homes, money, and some have gone to jail or prison many more are being charged with financial crimes. another party that can cause a title action is the title insurance company that insures the mortgage company's interest and the owners policy is rarely assignable without an endorsement (more fees)and would only be for the original amount. you'd prolly have to get a new policy or endorsement to cover your higher dollar amount interest.

    there are kinds of deeds that dont warant called different things in different states like quit claim deed and also contracts to deed or land contracts escrow to deed and stuff but they are not the same thing as a warranted deed and are risky without a good title insurance company standing behind the process and if the transaction is a fraud against the mortgage issuer are pretty meaningless.

    the schemes that these flipper gurus promote are actually financial crimes they dont file the paperwork timely or depend on reselling everything before the mortgage servicer, title company and such figure it out and can file a title lawsuit eviction action or foreclosure or they pay so little that they walk away further ruining the credit of the original owner. usually the whole thing is a major con. dont get sucked in and get legal advice also the other things subject to like unpaid taxes that were sold or paid by other parties would have title interest before yours.
    Last edited by Blue RidgeParkway; 09-06-2008 at 11:51 AM.

  6. #6
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    Default Re: Buying property – “due on sale” bank clause

    This thread is looking very much like a "shill and spam post". Two first time posters and a link to an infomercial.
    Jack
    Be sure you live your life, because you are a long time dead.-Scottish Proverb

  7. #7
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    Default Re: Buying property – “due on sale” bank clause

    Ya think?

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