So the same five things pertained to me, I have to get foreclosed on because I have the ownership of the property. Remember, this guy’s in a subject to transaction, there are two things going on one, there is a loan and two, there is a proof of ownership called a deed. These actually don’t have anything to do with each other, believe it or not a loan and a deed are two completely different documents are not attached in any way. So I can transfer the deed from one person to another person without ever changing the information on the loan.
So let’s say I the buyer of this property stopped making the payment on this mortgage, the bank is going to come to me and say we’re going to foreclose on you take that deed back from you, or we’re going to do a deed in lieu of foreclosure give you cash for keys, or you can do potentially a loan. That’s the problem. Now, this is where the difference is I can’t do a loan modification on that loan because it’s going to trigger the due on sale clause because now the bank is going to find out that I bought that property subject to and they’re probably going to call the due on sale clause.
Okay, so if you’re going to do a loan modification do it before you actually purchase the property subject to so you’re going to have the same things if you don’t make your payments or if your buyer on that house you can simply deed the property back to the previous owner and go hey, you know, I was wrong, I can’t afford these payments, I’m going to deed the property back to you. So I don’t get foreclosed on you don’t get foreclosed on etc. For us when we’re talking to sellers and a seller says, well pace I really like this idea of subject to because it gets me a higher amount of money, I really like it.
But what happens if you stop making payments, I go well, Mr. And Mrs. Seller, if I stopped making payments, pretty easy, I set up a performance deed which means I am required to perform otherwise, the deed goes back to you inside that performance deed we actually dictate and write out all the agreements that make the seller comfortable and myself comfortable might say, if pays more by default on this loan on day 31, the seller of this property can take the deed back in their name through this performance clause inside of the deed, it’s very simple.
We have an attorney draft, all that kind of stuff and the seller is protected. They can get the house back if I don’t make those payments, it’s very simple sellers, protected etc. Now, do I always have a performance deed on every single subject to that I buy it? The answer’s no, I don’t I don’t always have a performance deed. I do it when a seller asks me for it. And it’s something that I don’t care whether I have it, I don’t care if I don’t, but just default. I don’t put it in there unless the seller asks for it. So hopefully, that answers your question of exactly what happens if you don’t make your payments on your subject too long that you’ve overcome another solid. We’ll see you in the next video.