WHAT YOU SHOULD KNOW
At Re-Vitalized Properties, we place the utmost importance on safeguarding the entitlements and benefits of our esteemed veterans. Navigating the intricacies of VA financing can often be a complex and misunderstood process. It is our honor and duty to ensure they receive the full spectrum of benefits they rightfully deserve.
To that end, we invite you to explore the link below, where you can access valuable resources that can help you determine your eligibility and discover how much you might qualify for with a second VA loan. Our team of expert VA loan brokers has compiled essential information and insights that shed light on this financing avenue, ensuring you have the knowledge you need to make informed decisions about your homeownership goals.
WHAT HAPPENS IF THE DUE-ON-SALE CLAUSE IS CALLED?
It is vital to understand that virtually all mortgage agreements grant the lending institution the prerogative, though not the compulsion, to call the mortgage note due upon the sale of the property. In our experience, we have encountered such situations in a relatively infrequent ratio, approximately one occurrence for every 500 transactions.
It is important to note that when such situations arise, our team is well-equipped with a variety of strategies to effectively address and rectify the matter. One avenue we explore to navigate this scenario is proactive negotiation with the lending institution involved. This approach often includes discussions regarding possible refinancing options or structuring a new financing arrangement. Another viable recourse we pursue is the expedient sale of the property in question and in certain situations, we may consider the option of retiring the mortgage through a lump-sum cash payment.
WHAT HAPPENS IF YOU DEFAULT?
While it is important to emphasize that we have never missed a payment on any property we have acquired, we believe in taking proactive measures to safeguard the interests of our sellers. We often incorporate specific contractual provisions in our agreements that are designed to provide assurance to the seller in the unlikely event of a default by the buyer. In such cases, these contractual clauses empower the seller with the ability to repossess the property without the need for a formal and protracted foreclosure process.
This approach offers several substantial advantages to the seller. First and foremost, the seller benefits from the cumulative payments we have made towards the existing mortgage, which often translates into a substantial reduction in the outstanding loan balance. Additionally, any investments made in property improvements during our ownership period contribute positively to the property's overall value. Moreover, the appreciation in the property's value over the duration of our ownership further augments the seller's potential returns.
HOW LONG AM I ON THE MORTGAGE?
The duration for which our company retains keeps the mortgage in place is contingent upon various factors. While the ultimate goal is to see the mortgage through to completion, we typically estimate an average holding period of approximately 7 years for the properties we acquire. This timeframe is based on a thorough assessment of market conditions, local real estate trends and our specific investment objectives. It is essential to acknowledge that real estate markets can be subject to fluctuations, and our strategy is designed to adapt to these changes, allowing us to optimize the timing of the property's eventual sale and mortgage payoff.
WHAT DO YOU DO WITH THE PROPERTIES AFTER YOU BUY THEM?
Our strategic approach revolves around a multifaceted outlook aimed at maximizing property potential within the framework of our overarching investment goals.
A pivotal aspect of our strategy involves the astute implementation of various rental models, tailored to match market dynamics and local trends. This versatility allows us to offer short-term, medium-term, and long-term rental options, ensuring each property in our portfolio is optimally positioned for success.
Additionally, we remain open to owner financing when it proves advantageous for both parties involved, creating a win-win scenario. Furthermore, our property management strategy occasionally extends to collaboration with specialized asset managers. Depending on our current inventory and broader strategic objectives, we may choose to transfer property ownership to these experts, who excel in real estate asset management. In such cases, the asset manager assumes the property's day-to-day operations, providing mutual benefits as they take on operational responsibilities while compensating us with a fee for the property transfer.
MORE FREQUENTLY ASKED QUESTIONS
Yes. Fill-able HUD-1 This is a standard form that title/escrow companies and attorneys use to build settling statements. Please note lines 203 and 503. Note this is a Code of Federal Regulation (CFR) document. Page 396, second paragraph states: “Line 203 is used for cases in which the Borrower is assuming or taking title subject to an existing loan or lien on the property.”
“Subject-To” is a way of purchasing/transferring real estate where the buyer takes title to the property, and the existing loan stays in the name of the seller. In other words, the sale is completed “Subject-To” the existing financing. The buyer now controls the property, takes on all responsibilities of ownership, and makes the mortgage payments on the seller’s existing mortgage.
Sellers may consider utilizing the Subject-To method in low equity situations as it allows them to relinquish ownership of the property without the need for additional funds or having to write a check at closing. Depending on the seller’s mortgage balance, this method may result in greater financial gain for the seller compared to a traditional sale. Additionally, it enables the seller to move on from the property as they are no longer responsible for expenses such as repairs, maintenance, utilities, taxes, insurance, and HOA fees. The seller’s credit score may improve as a result of timely payments made towards the mortgage.
The buyer engages the services of a third-party loan servicing company, which is responsible for facilitating the monthly mortgage payments.Additionally, the sellers have the option to elect to receive notifications on a monthly basis, indicating that the mortgage payments have been fulfilled.
While we’ve never missed a payment, we take precautions to ensure everyone involved is secured. We include a Performance Clause in our contracts which ensures that, in the event of a default by the buyer, the seller is able to repossess the property without a formal foreclosure. If a scenario like this occurred, the seller would greatly benefit from any and all payments we made towards the loan, improvements made to the property, and appreciation in the property’s value.
Our insurance agent will be responsible for replacing your current policy with our policy, which includes the addition of the sellers as additional insured parties. Our company will be responsible for all things related to insuring the property and entitled to any claims. We will take the necessary steps to transfer utility services into our name.
The short answer would be for as long as we can keep it. We advise sellers and agents to anticipate maintaining their name on the mortgage until the mortgage balance is fully settled. However, as per my partners and I, the typical holding period is around 7-10 years.
As the loan remains in the name of the seller, timely payments made to the lender will be reported to the credit bureau, positively impacting the seller’s credit score. This can be advantageous for the seller.
This can be handled a number of different ways:
- We can use a payment statement from the servicing company to show a lender that the loan is being serviced by someone else. Since we’re using a loan servicing company, after 3-6 months you can show your current lender that the payments are being taken care of by a third party, and they will then start to reduce the impact of that debt on your DTI. After 12 months, 100% of the mortgage is removed from the DTI. We would do this by talking directly to the Underwriter for the new loan, not the Loan Officer. In this video, Matthew Bell, a Sr. Loan Officer since 2005, explains more about this ( https://youtu.be/W969oCEpjX0 ).
- We can use a Lease Purchase contract that allows you to report the rent and, in turn, allows you to use our down payment towards your new purchase without seasoning.
- Another option would be using a Bridge Loan for the down payment on the new purchase.
- We often leverage lenders in our network who can originate loans in all 50 states. We recommend contacting Matthew Bell of the Bell Group (https://bellgroupcmg.com/, Tel, (972) 999.1900). He can discuss this at length with you, and even send you next steps.
We are not buying the property based on the value of the real estate, we are buying the property based on the seller leaving the financing in place. With interest rates skyrocketing into the 7%+, a 3% interest rate is more valuable than any market shift.
Accidents happen–including home fires and natural disasters. The buyer is required to carry home insurance on the property for this very reason. The seller is listed as an additionally insured party until the note is paid off. If something were to happen to the property the seller’s interests are fully protected by the insurance policy.
- A purchase and sale agreement would be signed with the agreed upon terms to include agent commission being paid by buyer.
- Escrow would be opened with a title company/attorney of the buyer’s choosing. We work with an entire network of title companies/attorneys throughout the United States.
- Prior to closing, the deed is transferred, loan servicing is set up with a company like Weststar Mortgage and commissions are paid just like every other real estate transaction.
- A power of attorney/authorization to release information will be signed in order to add ourselves to the insurance policy and name the seller as an additional insured.
Since you are no longer the owner, the buyer will now be responsible for collecting rent, utilities, taxes, and maintenance. The buyer also gets all the upsides of ownership including all tax write-offs, appreciation, and cash flow.
The underlying debt and monthly payments will pass on to your heirs. Consult with your attorney on how to best do this.
The servicing company will deposit the money directly into your bank account and email you a receipt. Arrangements can be made if you prefer to receive your payments in a different manner.