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Buying Houses Subject To The Existing Mortgage Is Highly Profitable

Aug 17, 2007
There countless ways to structure transactions when buying properties as an investor. The most profitable and easiest way to start building wealth rapidly is subject to.

The basic mechanics of subject are quite simple; it's using the proper documentation that's the key to doing it properly. Here's how it works in a nutshell and then I'll explain all the documents needed to do it correctly.

Remember that only highly motivated sellers are going to deed you their property and keep the note and mortgage in their name. Now don't go telling me it can't be done because I'm the wrong one to say that to, since I have personally purchased hundreds of properties throughout this wonderful United States of America.

Once again the key is proper documentation. Once the property is deeded to you the absolute first thing you are going to do is run a title search to find out if there are any liens on the property. Don't worry if there are since most liens can be negotiated down to pennies on the dollar thus creating equity where there was none originally.

Here's a list of the documents you'll need to take over the property subject to the proper way: You'll need an authorization to release information signed by all sellers to be able to obtain information about the account from the bank or mortgage company.

Since you never want to have property deed in your own name you'll also need a warranty deed to trustee, the trust agreement and an assignment of beneficial interest which is the piece of paper that actually transfers title to you. Absolute mandatory is a limited power of attorney in case you seller skips out or dies.

The purchase and sales agreement, better known as the contract spell out the details of the sale such as the earnest money down payment, date and time of closing etc. It also spells out who is paying for what such as the survey, title search, documentary stamps, termite report, plumbing, heating and electrical reports, roof inspections are or can be part of the purchase and sales agreement.

Now you are going to need a mortgage and insurance telling the bank or mortgage company payments will now be coming from you as the trustee.
We do this so they don't question why the payments are coming from you and not the seller.

A bill of sale for personal property is also a good idea especially if you are doing a short sale. In a short sale the closing statement or HUD-1 as it is normally called can't show even one dime going to the seller. Keep in mind that the bank doing the short sale is doing it for the seller not for the investor. If they see any money going to the seller they just won't approve the deal.

An agreement and statement of understanding is needed to protect you the investor from many different things that could possible occur. Here are a few items that should definitely be included in this document.

That the mortgage on this property contains a due on sale clause which means that the lender has the right to call the entire note due and payable upon transfer of title.

That the mortgage will stay in owners name until it is paid off or assumed by a future known or unknown purchaser.

That the party named above accepting conveyance has no intentions of assuming said loan and that no promises have been made to owner stating that the loan will be paid off or otherwise assumed or that payments will be made in a timely manner.

That the party accepting this conveyance has agreed to pay any back payments, if any, to remove this property from the perils of foreclosure or default only upon the re sale of this property. No promises have been made to do so prior to that time.

That if the party accepting conveyance is unable to sell the property in a timely fashion, owner understands that any other amounts in arrears may not be paid further to bring the note current and it may yet go into foreclosure.

That the owner holds the party accepting the conveyance and/or their heirs, assigns, or corporation and trustees or any future acceptor of this conveyance, harmless and blameless from any debt, action, suit, payment or any liability whatsoever that may be associated in any way with this agreement or of notes, deeds of trust or other liens on this property.

The final items that should be included as are an agreement and disbursement of funds form and your escrow letter. That about wraps up the needed documents to do you subject to deals.
About the Author
Richard Reichmann is internationally known as a millionaire maker. He's a leading consultant in real estate and internet marketing strategies that are profit proven.

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