What Are The 'dangers' Of SELLING Subject-to?
I've got a loan on a property that I'm rehabbing. In about a month, I plan to get a new appraisal and refi with an 80/10 to get cash out. I've got tenant/buyers practically lined up to buy the place and I've gotten real good at explaining the virtues of buying rent-to-own (it's so fun now!). What I tell people who ask 'what happens at the end of the three years?' is: you have four options (1) don't take the house and move; (2) shop for a mortgage and buy the house with new financing; (3) write up a new lease and new option agreement to give yourself more time to build up equity and savings before purchase; or (4) I can owner finance the balance (probably with a five- or ten-year balloon).
Here's the question: if someone picks door number 4, I realize I'm in a riskier position because I've given over title but still hold the loan (and would need to foreclose, rather than evict if they don't make payments), but are there other risks or concerns I haven't thought of? Any tax issues to consider?
Also, what I'm assuming we need to do is change the title after the refi next month from our personal names to a land trust (with our LLC as beneficiary). Then if we sell the house sub-to, all we need to do is change the beneficiary to the buyers' names...yes? Any concerns with that scenario?
I appreciate any strategies or stories you're willing to share! Thanks!
There may be some advantages to you selling using a "Contract For Deed", or a "Wrap", or "Land Contract". (Depends on what the common nomenclature is in your area). This would not be selling "Subject To". The above scenario leaves the title to the property in your name until the terms of the contract have been fulfilled.
The main drawback to selling property "Sub2" is that you are no longer on title, but you are still on the hook for the financing if your buyer doesn't perform.
Good luck,
Jeff
Great idea! I've heard the terms but don't understand them, so didn't think of them. Do you happen to have any links that would help explain these scenarios? Thanks so much!
Just keep reading in the sub-to forum and you will learn all kinds new tricks to use in your arsenal. it's a great place to learn alot... Good Luck
Jeff is right,
There are many ways. I have a property that was in a trust and just did a 3 year unrecorded land contract on it last month. Got some extra cash and a future sales price out of it. The attorney that closed had the buyer sign a quit claim deed and the even was unrecorded, and held in escrow with the closing attorney.
Good luck
Rich StS