A Legal Loophole That Can Cause You Serious Subject-to Trouble
One of the things that many investors find most appealing about subject-to investing is that their credit is not involved
. From beginning to end, there is no investigation of your ability to pay, your credit history or your other outstanding debt. This is especially good for real estate investors with multiple holdings since many lenders are hesitant to loan money to people who already have mortgages in their names or their company names. And, in the event that you are unable to pay the mortgage, your credit is also not at risk, although if you are unable to handle a subject-to home you should never purchase a property in this manner.
This gives a lot of subject-to investors a feeling of major security. In a lot of ways, subject-to investing really does provide major benefits without major risk. However, should you fail to pay that mortgage at some point in time and the results culminate in foreclosure or credit damage, the original borrower could attempt legal recourse against you if you do not structure your contract correctly.
In this article, we are not going to give detailed legal advice on how to set up your contract with the homeowner. This is something that varies by state and must be addressed in a situation-specific manner by you and your lawyer. However, it is vitally important that you understand that most subject-to contracts that you will have access to unless they are specially written and reviewed by a subject-to investing expert will not necessarily protect you from any and all legal repercussions should the worst happen and you or whomever you sell the property to ultimately fail to hold up your end of the bargain. Get your own contract, and make sure your lawyer takes a good look to insure it protects you from every possible circumstance, including failure to pay. Even if you know you would never do that, if you sell that property you need to be sure that the responsibility is no longer yours. Otherwise, someone elses failure could end up costing you thousands.
Peter Vekselman has been successfully investing in real estate since 1996.
He has completed over 1200 real estate deals, owned a construction company,
been a private lender, and owned a property management company. Peter
currently works with clients all over the US helping them achieve riches in
real estate investing. For more information please visit
www.CoachingByPeter.com.
by: peter V
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