Buying A House On Contract In Foreclosure
I have been offered the oppurtunity to buy a house that is currently in foreclosure (pre-sherrif sale) and is being rented. I am the only game in town and could buy the place for what is owed on a contract for deed. I would have to put down enough to bring the mortgage current, which would be about 5%.
How can I be sure I do not trigger the due on sale clause? The foreclosing mortgage is through WMU. It sounds like from the posts on this forum I should still close through a title company. Can I require the seller to forward his mortgage statements to me? Any additional advice?
Record your contract with the recorder of deeds. This will put the world on notice that someone else had an interest in the property.
You should pay the seller's lender directly, with any extra being paid to the seller.
To avoid trigger of "due on sale clause":
You could simply record nothing but this places you somewhat in a danger zone
You could create a lien or other encumbrance subordinate to the lender's security instrument
You can create a granting of a leasehold interest
You can transfer into a trust
What will normally pull the trigger is:
Change of hazard insurance beneficiary.
What can pull the trigger, but most likely will not:
Change of name on the deed.
Different name on the check received for payment.
[addsig]
Quote:
Record your contract with the recorder of deeds. This will put the world on notice that someone else had an interest in the property.
You should pay the seller's lender directly, with any extra being paid to the seller.
So paying the lender directly would be safer for me, but might trigger dos? I know making the check out to the lender would make refinancing the property more difficult (it's my day job).
Also, what advantage is it to let the world know I have an interest in the property besides homestead taxes if I lived there?
In my state (PA) you do not have to record the CFD. If you do not record it it is very unlikely that the bank will ever find out.
In my state (PA) you do not have to record the CFD. If you do not record it it is very unlikely that the bank will ever find out.
Shouldn't an unrecorded contract still be notarized though? Should I do a title search first?
Since you are buying you definatly need to do a title search. The seller could agree to sell to you at $100k but if she has a $200k loan on the property there could be a problem.
Also, when buying you need to record the contract for deed---even if you are not required to. This puts notice to the public that you have an interest in the property.
The best bet is to buy the property "subject to the existing mortgage" on the property. In a nutshell, you take the deed and just start making the mortgage payments to the bank. Do a title search here also and get title insurance. This is the safest way to buy.
I have had a very painful experience with an uncooperative seller when I bought on contract for deed. Tell us more about your deal.
A friend (Tim) of a realtor I know is in foreclosure and needs $2,331 to bring the mortgage current by Jan 14. Payments are $312 PITI and currently rents for $425.
It is in a one horse town and isn't in the best condition so I'm concerned about being able to re-rent it for $425. The part that makes the deal attractive is I can just assume his payments and buy it for what is owed on contract. I was planning on not recording the contract as I don't want to trigger the DOS clause or get conventional financing on it as a purchase.
Why take title if you can't homestead it and risk the loan being called? I am weary on the condition of the house and don't believe it could be refinanced with the balence owed. Then why buy it, right? It cashflows and I could pay the mortgage off in 10 years and my return of capital is about 12 months.
Quote:
I would still take title to the house. Many have done it with no problems.
You don't need to record the title. Just be absolutely sure you completely trust your seller, or they could re-sell, refi, or encumber the property with other loans/liens without your consent--remember, you officially have no interest--since they still officially own it. They might be grateful for the rehab you've done on their behalf...CYA...