What Is An Assumption Warranty Deed?
I was contacted today by a possible investment opportunity...that I don't fully understand 
It involves buying from a seller using an assumption warranty deed on a mortgage that isn't necessarily assumable. You do or don't record the deed, use the same mortgage coupons and maybe the bank will notice, but probably not.
This sounds illegal to me - but the investor I spoke with didn't think so.
It sounded like an assumption warranty deed is different from a contract for deed in that you acquire the deed immediately? Does that sound correct?
In the scenario this investor mentioned, the motivated seller needed to transfer the deed in order to be approved for a new home.
Thoughts? Explanations?
Thanks,
Wendy
Sounds like you are buying subject to an existing mortgage. It is fully legal. The mortgage stays in the name of the borrower even though they deed you the property. Normally you also agree to make their payments (it is wise because the bank can still foreclose if you don't pay!).
There is a lot of good information that is more in detail if you are interested in reading up.
Assumption Warranty Deed - A warranty deed that references an existing mortgage(s) that grantee agrees to become liable thereon. By taking the deed, the grantee agrees to assume the mortgage(s) and become liable on it.
If the motivated seller wants to buy a new house, he wants this mortgage off his credit report. He will record this deed. But I don't think that recording the deed will not take it off his credit report. He will have to notify the lender also.
Not really a clue what, how, when or why.
Brenda
If the mortgage is going to stay in the sellers name, then how does this help the seller buy another house of even refinance another one they may have?
The owner probably will show a rental
agreement showing the property is rented out making a positive cash flow.
They will count 75% of the income which
will probably mean he breaks even on his payment. He will then go buy his new
house. The rental agreement will probably be fake, but it happens all the time. This is what I think is going on.
The seller just wants out!
Jeffrey Adam
[addsig]
I think the Seller has not solved his problem.
The fun part comes when the Seller notifies the bank that he has sold the property and wants his name removed from title. It is at that moment that the bank then comes forward and probably says to you the new Buyer. "OK Buyer here is a 1003, fill it in. You have agreed to assume the mortgage and so you shall if you qualify and of course pay us a small fee for our paperwork and wear and tear on our office machinery. How about one point? If you have good credit. If not well the points go up and if you are person possesing a FICO score of about 400 they call the note due. Or, yes here it comes Increase the interest rate and the points due to compensate for the risk of having you on title.
I would ask for a future performance from the Seller in exchange for Assuming that Mortgage. Perhaps the payment of any future requested points. Or now this is really European, an agreement to continue some form of recourse agreement for the next five years. Oh my god shades of the Bank of England. Whatever. But be aware that there is this possibility.
In any case enjoy the house. Lucius.
[quote]
On 2004-01-23 03:45, Lufos wrote:
...I would ask for a future performance from the Seller in exchange for Assuming that Mortgage....
What is a future performance
Thanks for the feedback!
In the situation where the investor contacted me it makes sense...this is the specific situation: The motivated seller wants to have a new house built. The investor (who contacted me) guarantees to the builder that the seller's house will sell by the time the new house is ready.
It is only the builder that has to be satisfied, they are financing the newly built properties themselves, and they are satisifed with an assumption warranty deed.
The investor passes the property on to a person like me, and he gets paid by the builder for making sure the seller can buy the newly built property.
Hmm, makes sense now to me. The investor did tell me the property would never hit my credit score, and I liked the sounds of that.
Thanks for all the info!
Wendy
There is a lot of good information that is more in detail if you are interested in reading up.
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Could you please point me in the right direction for that more information?
Thanks!