However, as noted below, all things are negotiable.
Also, if you are attempting to conduct a "subject to" deal, I would definitely get in contact with the banks and form a working business relationship. If a relationship can be built in so much that they know who you and your business are, you will have no need in worrying about the "due on sale" clause. I would say to attempt to hide the transaction from the bank is unlawful and even if they did stand to loose money, they would still accelerate the loan because of the fictisous and savage way that you attempted to manipulate thier asset.
I think only a devious investor would tell you otherwise, and I would dare say that investor will not have a happy end.
Consult a Real Estate Attorney. It's better to be safe than sorry, right?
In my opinion, I wouldn't touch this deal with a 10 foot pole.
Happy funding, Rudi
Sometimes yes. Sometimes no.
What you're talking about (excluding assumable loans, which are rare) is a technique called "subject to." That means you're buying a home "subject to" the existing mortgage. Shel-lee is correct that such transactions can trigger the "due on sale" clause. It doesn't happen often, but it can and she's obviously seen it occur.
The basic mechanics are simple: The owner deeds the property to you. You, in turn, promise to make the mortgage payments. An owner would be willing to do this to get out of a major problem--falling behind on payments, upside down on the mortgage and not able to sell, etc.
Usually, the amount of money paid by the buyer to the seller is minimal, if anything at all. It's more likely to occur when there's some equity in the property. Maybe the house is worth $100,000 and the seller owes $50,000. Technically, it would make more financial sense for the seller to sell conventionally, but if the seller needs to get out quickly, that might not be possible. So the seller could deed the house to the buyer and ask for, say, $10,000.
It's far less likely to occur if there's no equity in the property. Assume the house is worth $100,000 but the seller owes $120,000. Why would a buyer want to pay $10,000 to acquire a property that's already $20,000 upside down? (Actually, there are a bunch of reasons when it could make sense. But they don't occur all that often.) In that case, the buyer likely gives the seller little or no money. Coming in and taking over the mortgage payments is enough to satisfy the seller.
So it really depends on the circumstances and how good you are at negotiating.
Hope that helps.
All that being said, make sure you have proper representation, an iron clad contract, and a way to get out (if you need to). You want to be well protected. Most loans have "due on sale" clauses that would be triggered by a 'take over mortgage payment' deal. You need to have a way to deal with that when or if it happens. And it does happen. I recently had to help a friend of a client save his property from foreclosure on just this type of deal gone bad. And he had equity. (I wrote about that in a previous post)
Good luck and Dare to Dream.
Shel-lee Davis, QSCÂ®
Certified Distressed Property Expert â€“ CDPEÂ®
Short Sale & Foreclosure Resource â€“ SFRÂ®
Certified HAFA Specialist â€“ CHSÂ®
Your Real Estate Consultant for Life
RE/MAX Palos Verdes Realty
In California's Central Valley assuming somebodyâ€™s mortgage is more rare than not. Many loans have acceleration clauses in them that can prevent the transfer of title by requiring the note be paid in full prior to any transfer. If you do find one, a down payment would most likely be negotiated between the buyer and seller. The note could also contain language. At the end of the day, every deal will most likely be different. If you have a specific situation you would like to elaborate more on let us know. I hope this helps.
Rocky G.H. Hawrysz
Prudential California Realty