What is a “Subject 2” Deal?

then the mortgage is still in the original owners name....right?

What if, you, or your leasee defaults? The original owner gets nailed!

How is he/she protected....actually how are all parties protected?

thanks,
D

What if you have a good deal going on where you're doing the lease option, you have a tenant-buyer who is now renting to own from you, and the actual owner stops making the payments on the house. How do you protect yourself from the house going into foreclosure and your tenants who are looking to exercise their option to purchanse?

Kim

How do you protect yourself from the 'due on sale' clause the lenders have?

If your lessee defaults YOU are still responsible for the note since you are just leasing to them as a tenant.

If YOU default, the the original owner is held at fault, but if you know you could not afford it or had ways to protect your purchase you should never have done it in the first place.

first of all YOU should never be making payments o the original owner anyway. This should be set up with you making payments directly to an escrow company or something of that sort that will make the payments for you directly to the lender.

First of all you simply do not tell them that you have deeded to property over to someone else. If you set your payments up to be paid through an escrow company then that lessens the chance of them finding out directly and even if they do, then most of the time they are willing to work with the new owner. Remember the lender only want to make sure they are getting paid.

If my lessee defaults...most likely I would default as well, cause without his/her payment I cant make mine (just like having a mortgage and a renter....you cant afford your mortgage without a renter)

so to say "if you know you could not afford it or had ways to protect your purchase you should never have done it in the first place" is not a proper comment.

I have to disagree. You should ALWAYS have a back up plan. So in those cases when they lessee cannot make the payment you should be PREPARED to take care of it. Because regardless of what your leasee does, ultimately YOU are the one responsible for that mortgage and you should not forget that.

Also, and I will stand by what I said earlier, if you could not afford it or had a plan to make payment in case of default by your leasee, then you have put yourself in that situation.

Never count on someone else, even if you have them under contract, to take care of your responsibility...that is your job.

That may sound a little harsh but its the truth. Its like me signing a lease on an apartment for a friend and then the friend does not pay, so I am then stuck with the lease or even better the lawsuit after they have been evicted. While they pretty much walk away free ad clear. So if and before I signed on that lease for that friend I had better done due diligence in making sure they could afford it, would pay for it and be responsible for it AND I should have also set aside a rainy day fund just in case they missed a payment or was not able to pay for some reason. That way my credit would not be ruined.

As with anything, due diligence in both the purchase, the buyer and the seller.

agree to disagree. Its just like 99% of americans..they have a mortgage and DEPEND on the income from their job to pay for it. If they get fired, layed off, or whatever.....

Q - What happens?
A - They most likely can't afford their mortgage now.

..

I agree Anita, it is your responsibility to cover the cost if a situation arises! You could spend all day saying if! But the advantanges of this type of financing out weighs the disadvantage. The only chance you are taking is on yourself! Continued success.........Lubertha