Why was it called?
Is the property a good one or a dud?
Is the property vacant?
Have you spoken (I know this is a hypothetical) to the lender?
Other possible solutions not already mentioned for the DOS might include:
1. Hustle to get your residents financing.
2. If you're carrying paper, (i.e., sold O/F), you could sell the note at a discount if the proceeds are enough to pay off the underlying.
3. Call the lender and explain the situation and see what happens.
4. If the seller blew the whistle, then you probably have even more options as long as you take care of your residents.
I think the most important aspect of NOT worrying about the DOS sale is the confidence that YOU can refi the loan in your name if all else fails. If you have that capacity, the DOS is a non-issue.
I attended my local REI associations meeting the other night and this subject was brought up - of course - when some of the senior investors were discussing all the fantastic sub2 deals they were doing.
One answer that I thought was interesting was this:
"Call Their Bluff."
Basically, going with the same idea as to why they wouldn't call it due in the first place: banks don't want more REO properties to sell! They don't want the house back. If for some reason they decide to call it due, you can call their bluff.
Say "Fine. Take the house back. I won't make any more payments, starting today."
Now, I don't personally know if this works. But the investors there said that in general, the banks would then try to work with you on this and might let you assume the loan formally - especially if you've been making the payments on time.
Anyhow, it doesn't sound like the DOS gets called very often.... and if you did buy right, as all of our mentors say we should, then you should have plenty of options to cover your rear.
Good old Ron Legrand reccommends that you call their bluff with a little extra twist. Tell them you will no longer make payments and you cannot guarantee what condition the house will be in when they take it back. You know it will be vacant and who knows what type of vandalism may occur. You can offset this statement by reminding them that the payment is current (hopefully) and that the home is currently in good condition with a tenant in the home taking good care of it. If the message does not get across, then your probably going have to get financing either for yourself or your tenant if you cannot wholesale it in time.
There are ways around the due on sale clause. Several investor teachers have courses that will help you avoid this. You have to think a little out of the box for this. If you are worried about this. Its a consideration but I wouldnt loose a lot of sleep over it.
Awhile back, someone on this board advocated the ostrich approach (as a way of calling their bluff). Keep sending checks, and see if that doesn't just about cover it unless the checks start coming back.
This may be considered to be just semantics, but the intention of most that post here or offer help here are not advocating "getting around" the DOS as much as we are suggesting not to advertise that a title transfer has taken place to the lending institution. Not "rubbing it in their face", so to speak.
DaveT has given good advice.
I'd like to add a suggestion. 'Be prepared to do what is necessary to preserve your integrity'. You have an obligation to the person that you acquired the property from to do what's right. If calling a bluff is part of your negotiating tactics, that's ok. Just remember its not your credit that your dealing with, "its your credibility", and the credibility of the rest of us investors could suffer as well. As always weigh your options, and decide whats best.
Acting with integrity is not always the easiest, or least expensive route, but you never find yourself having to apologize for either.
Good luck ,
Jeff [ Edited by jeff12002 on Date 11/10/2003 ]
Some possible solutions that come to mind:
a. Pay off the loan with your own cash.
b. Refinance in your own name.
c. Sell to another investor for cash
d. Ask the lender for their assumption package, then assume the loan.
most deffinatly answer... d
There are many unknowns in your question.
Why was it called?
Is the property a good one or a dud?
Is the property vacant?
Have you spoken (I know this is a hypothetical) to the lender?
Other possible solutions not already mentioned for the DOS might include:
1. Hustle to get your residents financing.
2. If you're carrying paper, (i.e., sold O/F), you could sell the note at a discount if the proceeds are enough to pay off the underlying.
3. Call the lender and explain the situation and see what happens.
4. If the seller blew the whistle, then you probably have even more options as long as you take care of your residents.
I think the most important aspect of NOT worrying about the DOS sale is the confidence that YOU can refi the loan in your name if all else fails. If you have that capacity, the DOS is a non-issue.
those are all good answers and I did think of most but thought there might be something I missed. great job guys appreciate the help and speedy reply
[addsig]
I attended my local REI associations meeting the other night and this subject was brought up - of course - when some of the senior investors were discussing all the fantastic sub2 deals they were doing.
One answer that I thought was interesting was this:
"Call Their Bluff."
Basically, going with the same idea as to why they wouldn't call it due in the first place: banks don't want more REO properties to sell! They don't want the house back. If for some reason they decide to call it due, you can call their bluff.
Say "Fine. Take the house back. I won't make any more payments, starting today."
Now, I don't personally know if this works. But the investors there said that in general, the banks would then try to work with you on this and might let you assume the loan formally - especially if you've been making the payments on time.
Anyhow, it doesn't sound like the DOS gets called very often.... and if you did buy right, as all of our mentors say we should, then you should have plenty of options to cover your rear.
Good luck,
DK
Good old Ron Legrand reccommends that you call their bluff with a little extra twist. Tell them you will no longer make payments and you cannot guarantee what condition the house will be in when they take it back. You know it will be vacant and who knows what type of vandalism may occur. You can offset this statement by reminding them that the payment is current (hopefully) and that the home is currently in good condition with a tenant in the home taking good care of it. If the message does not get across, then your probably going have to get financing either for yourself or your tenant if you cannot wholesale it in time.
wow that last statment .... but hey hard ball is ...... ive spoken with several sub 2 investors ...no dos yet ...
There are ways around the due on sale clause. Several investor teachers have courses that will help you avoid this. You have to think a little out of the box for this. If you are worried about this. Its a consideration but I wouldnt loose a lot of sleep over it.
MP
Awhile back, someone on this board advocated the ostrich approach (as a way of calling their bluff). Keep sending checks, and see if that doesn't just about cover it unless the checks start coming back.
This may be considered to be just semantics, but the intention of most that post here or offer help here are not advocating "getting around" the DOS as much as we are suggesting not to advertise that a title transfer has taken place to the lending institution. Not "rubbing it in their face", so to speak.
DaveT has given good advice.
I'd like to add a suggestion. 'Be prepared to do what is necessary to preserve your integrity'. You have an obligation to the person that you acquired the property from to do what's right. If calling a bluff is part of your negotiating tactics, that's ok. Just remember its not your credit that your dealing with, "its your credibility", and the credibility of the rest of us investors could suffer as well. As always weigh your options, and decide whats best.
Acting with integrity is not always the easiest, or least expensive route, but you never find yourself having to apologize for either.
Good luck ,
Jeff [ Edited by jeff12002 on Date 11/10/2003 ]