By: Cody THOMAS
Investing in Foreclosure, my number one concern has always been the due on sale clause from the lender.
I recently find out a way to avoid that problem and can sleep better at night instead of trying to refinance as soon as possible, mainly when I get pre-foreclosure properties and "assuming" a 10%-12% interest mortgage.
My last buy was in a very nice and quiet neighborhood in Sevierville, TN.
These owners have tried a business, which, unfortunately, didn't bring their expectations.
They soon faced hard time to pay bills, mainly the mortgage.
So, with a pre-foreclosure in place, this is how I proceed.
Owners have to provide me with mortgage back payments and all unpaid bills. In this case, they were 4 months behind and didn't pay their real estate taxes.
Paying the bank will probably bring a red flag somewhere. The big deal is the insurance though, when the insurance company send any change to the lender.
I decided to assume the mortgage and quit claim the property with a "leasing" shield.
So, we decide that the owners will "rent" the property to me and the rent is...the mortgage payment amount.
However, I don't want to give the payment to the owners, since I can't put my trust in them regarding money. So, I actually called the bank saying that I was the new tenant, but I wanted to pay them directly, since I know the owners have difficulties to pay and don't want to live in there for 2-3 months and then, they foreclose and kick me out...They seems to be happy to have the payment instead of foreclose.
We, then, have a "12 months lease", so I have plenty of time to shop around for refinancing.
I'm just avoiding the "due on sale" clause since it's rented and not sold, but I'm on the deed since the quit claim.
