Most mortgages after the 1980s have a clause making them not assumable
So how do you sell subject to
Most mortgages now days after the 1980s have clauses making mortgages not assumable... How are you able to work with these and sell a property "subject to existing financing"? Wouldn't that clause keep you from making this kind of sale legally impossible?
You are absolutely correct about most mortgages being non-assumable since around the 1980s.
The difference here is that the buyer isn't actually "assuming" the mortgages. In this case, the seller is assigning their payments to a new buyer. Some attorney's also call this a "silent assumption" or "non-assumption assumption".
This type of payment assignment will trigger the due on sale clause in a mortgage because the new buyer is not qualifying with the bank and not getting the banks permission to assume the new loan but it's not "against the law".
The mortgage company at any time has the "option" but not the obligation to exercise their right to call the note due and this is something we disclose numerous time to both buyers and sellers in these transactions.
In fact, many investors, and we have started this as well, write a letter to the bank after closing and submit that letter with the first mortgage payment stating that this type of transaction has taken place so that the bank is made aware.
Hope that helps!
So on these transactions the Real Estate Investor makes money on the assignment of the Purchase & Sales Contract to the end buyer by stating that this is the down payment?
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