Due On Sale Clause SOLUTIONS


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One of the very few due on sale clauses that I’ve ran into was because I reinstated alone, the day that we close escrow, we got a reinstatement we then go, let’s close escrow the same day, the next day, I now in the property owner, and so the company Johnston bank, the president of the company was somebody who physically like monitored all the foreclosures that they had on their portfolio. And so he would go in, he would look at the foreclosure stuff, and he was the person that would literally take the manila folder from the in default, and then put them back into reinstatement. Physically, he would do this physically.

Well, when he did it on our property, we get the do on sale clause called on us. And we didn’t know why, obviously, but we got the letter, because we’re the owners of the property. So we get a due on sale clause letter sent to us. And so I was like, I’m just gonna call the bank, it’s a small bank. So we call the president of Johnson bank, I go, Hey, you know, we just caught this up, he was $21,000. in arrears.

As you can see, we have a second note in deed of trust with a private money lender, we went and raised private capital to catch his property up and we you know, we’ve already made the next month’s payment, why are you calling the due on sale clause, and he goes, Well, because it’s big policy. We’re a small bank, my father put this rule in that if anybody ever sells a property through subject to he knew what subject to was very clearly, my father always put in that if the property ever sells that, we’re going to call the due on sale clause at this point, this was four years ago.

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So I’m pretty well versed in creative finance, by this point, probably one of the best people in the business at the time. So I knew to ask the question, so I go, Okay, well, what are your other clients that have bought houses subject to what have you advise them to do? If the due on sale clause got called on them? It goes, Oh, we just tell them to deed the property back to the original owner and then repurchase it on an agreement for sale. I go, Okay, well, we can do that easy. I’ve done that a few times. That’s super easy. So he advised me like exactly what to do. And so I go, Okay, I’ll do that.

And I go, is there anything creative like you’ve seen other people do that nobody else has done before. And he goes, Uh, I’ve seen people eat the property back to the owner and then repurchase on a lease option. And I’m like, I really don’t like that because then I don’t have actual ownership of the property. And so what I did is I came up with a creative way to rebuy that property. So the way I re bought that property is I re bought it on a lease option.

And my option price is the remaining mortgage balance at the time that I execute my option, that’s the option price so my option price changes every single day. That’s what I learned like four years ago, I learned you can adjust and change anything you want on a contract and I was like, wow, I magic. I can do anything I need to do and my whole life. I can change contracts around and manipulate them and make them work for me in my favor. I imagined.