CREATIVE FINANCING & SUBJECT-TO

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YES! We are Georgia's MOST Investor friendly law firm - handling all sorts of creative financing ... and that includes Subject-To Transactions. 

Straight from Wikipedia:  It is "non-traditional or uncommon means of buying land or property."  It may include the Buyer or Investor utilizing Seller financing or even them taking over payments on an existing loan (subject-to).  

It's a type of closing that allows Buyers to acquire a property while leaving the existing mortgage in place.  It is absolutely not a formal assumption of the existing loan. While not without risks and complications, it can provide a solution for both Buyers and Sellers.  There are plenty of resources and information across the Web to learn more about it - but yes, we can handle these transactions! 

There typically is language in the loan documents that states if title to the property changes that the loan is to be immediately paid in full. There are a narrow range of exceptions covered in the Garn-St Germain Act and by practice. For instance, MOST lenders will allow a person to transfer title to an LLC they are sole member of or at least own a majority interest.  Sell it in an arms-length transaction - you MAY trigger the Due On Sale clause.  Can we guaranty what will or will not happen? Unfortunately we cannot. 

Nope!  Section 341 on Page 37 starts the discussion about Due On Sale clauses. Section 341(c)(2)(d) goes into the restrictions of when a lender may NOT call the loan due.  The exclusion do NOT cover 1) transfer/sale to a non-relative, 2) transfer into a Trust where the borrower is not a beneficiary or an occupant of the property. Read the 80 page Act on the link below. 

Another longer conversation.  Short answer ... ANYTHING COULD HAPPEN. Everything depends on who knows what and how they act.  I can say that first of all, all Powers of Attorney and written authorizations become legally ineffective.  That is not to say a lender wouldn't improperly use one - but if they don't, you wouldn't have a good argument to say otherwise. 

A lot of the time when a lender knows their borrower is deceased, they expect to receive probate documentation so they know who is the LEGAL representative of the Estate. Sometimes lenders will only talk with that person.  If you are the Buyer/new owner - your online access may not change, but you might have difficulty communicating with the lender because of all of that.   

If there is Seller financing involved - payments would continue to go to the Estate and ultimately a cancellation would also need to come from the Estate.  

We do know of a lender who found out the borrower died, saw title had transferred earlier to an LLC and despite payments being current, declared the loan in default and refused to communicate with the new owner.  Yes, they started the foreclosure process.  As a law firm we were able to get a written payoff and take care of the loan before the foreclosure date. 

Unfortunately, this is one of those events that little can be done to plan for. 

Another longer conversation.  Short answer ... ANYTHING COULD HAPPEN.  A lot depends on how the Borrower files.  The issue is that loan is still the Borrower's debt, but the property is no longer an asset.  In most cases it is just an administrative bump in the road.  But it could be that window where the Lender finds out the title was transferred and the due on sale clause is triggered. 

That's a longer conversation - BUT if you are contemplating doing a closing like this ... the worksheet below might be a good place to start working through the details.   Download it now and let us know how we can help you!