Due on sale clause?

You could refinance, but there should be enough equity in the home. So, how much is enough equity in a home? Thanks!

If that worries you then don't do subject to deals. No matter what you do, there will ALWAYS be that risk. I have never heard of a lender exercising this option. NEVER! Anybody here ever had a due on sale clause issue? ANYONE?

If you have a loan at the existing rate of say 6.5% WHY would a lender call it due with rates at 4% or less?

If the mortgage is being paid on time in this environment of millions of REOs and people underwater and or behind on payments why would a lender call the sale due?

Now if interest rates go 2% to 3% or so above what the existing rate is on the subject to you have, then there MIGHT be motivation for the bank to call it due. If they even NOTICE!!!!!

I never say a word to the lender. I let my title company handle all the details. My job is finding the deals! I actually prefer a sandwich L/O anyway.
If you are worried about due on sale clauses, the L/O has none!

Michael Mangham
Mentoring/Team Building Nationwide
MD Home Acquisitions LLC

as the market heads back up there may be a great incentive for the banks to start calling the loans. I guess with L/O you just have to worry about the seller having financial problems. I know there is always some risk. I am unclear about the equity though. I read from Wendy Patton that there should be enough equity in case one had to refinance or it wasn't a good deal after all, however, how much is considered good equity? Some percentage?

as Michael said, you can't get rid of the risks. You can minimize them, but the DOSC will always be the hanging sword of Damocles. I have done a number of "subject to" properties and even I worry about them each time. Common sense says that they won't be called due as long as you pay, but you never know. Also, the biggest mistake investors make on "subject to" property is to stop paying since they feel they have no downside. That is a wrong attitude as it can be construed as a fraudulent conveyance from your seller. FYI, we place each subject to into a separate LLC to limit liability.

Can you qualify for the re-fi? Do you have a lender lined up? Call them and ask them what they would charge. Then you would know how much is needed to cover the costs. Of course this will be property/deal specific. So, once again finding out what is going on will be much easier if you have a specific seller/property you are working with. Otherwise you can get lost in all the theory!

Personally, I never do a subject to or a L/O based on what I think it will be worth in 5 years. Just my opinion. Lots of people did that in 2008. OOPS!!! L/O that has no equity? What are you doing? Market speculation? It has no equity but it will later?? Buy based on the market today. I never do one that has no equity. Maybe a short sale?

Also, watch unemployment, that is now the determining factor on how fast the market goes up. I certainly don't see interest rates going up so far as to have lenders calling in due on sale clauses. IF they even know about them!! They can't keep track of foreclosures right now.

Michael Mangham
Mentoring/Team Building Nationwide
MD Home acquisitions LLC

One reason I have not done "subject to" is because here in Florida we can't
get homeowners insurance on the property. As for due on sale clause, Regions Bank have called in loans on 9 properties here in Citrus County, Fl. in the past month. They don't care what the percentage rate is on the loan, nor do they care that the payments are being made ... they just want to sent an example!
In fact just this past week there was an investor in Hernando County, Fl. that was "helping people going into foreclosure", getting them to sign a quit claim deed & then marketing to buyers. I don't know if it was because of the way he did it(contracts, documentation, etc) but was arrested for it & taken to jail. They are checking into two Citrus County properties that he did the same thing.
That's why I still stick to my "old fashion" way of buying, rehabbing, and
flipping to end retail buyers.

it may have to do with a fraudulent conveyance of the seller's equity. There are a lot of investors that feel they must take advantage of someone to make money. We both know that is not the case as transparency and honesty go a long way in building a long term business.

Regarding the Florida subject to issue; is that a current shift regarding insurance. I have 2 subject to homes in Florida but on the other coast and had no trouble. Of course, I did them a few years ago but still own them.

Maybe I should just stick with the wholesaling idea. I was trying to expand my options, but like it is said I should just stick to one thing to start out. Thank you for all the information. Bill Thank you for noting how you place each subject to in a separate LLC as well. Tammy

Do you think the banks are going to want to pursue foreclosure on a note that is totally performing when they have all these other non performing ones to worry about. Read this thread about due on sale clauses. http://www.deangraziosi.com/real-estate-forums/financing-and-credit/5881...

Really, the chance of them enforcing a due on sale clause is very, very low. And, if a bank were to ever say something, just keep on making sure the note is current. That's all they really care about right now.

doesn't sound like he was doing things legitimately having them QCD their title. About the 9 properties that were 'subject to' that were called due, was this a small bank or a large bank? I haven't heard of Regions. But they usually don't go to jail; they call the loans due and begin foreclosure, which costs banks a lot (up to $50K, at least here). When you do a subject to, you explain to the seller as well as have them sign saying they understand there is a due on sale clause in their loan and that the bank can call it at anytime. The expert on Subject to Is Randy Vaughn, wish he would pop in for few moments

If the seller is ok on her payment, and just want out of it....and l/o sounds interesting to her- what then?