We are going to begin this section by discussing a few
variations on the most commonly talked about no money down formula: the
assumption. There are two basis types, the
formal assumption and the subject to assumption. We will begin with the
simplest and end with the most complex. Unfortunately, as with so many things,
the method that is the simplest to implement is also the most difficult for
which to find a suitable seller and property.
Conversely, the method which is the most complex, is the easiest to find
an appropriate property.
Although, you will rarely run across a property that lends
itself to this first method, they do occasionally pop up, so keep your eyes
For one reason or another, occasionally, a person wants or
needs to sell a property right away. Maybe
they just lost their job and feel that foreclosure may be imminent, or possibly
they have just been transferred and don't have the time necessary to get top
dollar. Regardless of the reason
for selling, the procedure is as follows:
Let's say the property has an $80,000 loan against it and
the seller wants only $80,000 dollars. You
simply offer to take over the payments and assume the loan.
The actual procedure is really, pretty simple.
It is a matter of writing to the existing lender and asking for a “Assumption
Package”. You would have to
formally assume the loan, just as if you were getting a brand new loan.
A loan application will be taken, credit report done, and a fee charged
ranging from about $400 to $1000. The
seller signs a grant deed conveying ownership of the property to you, you record
the deed at the county recorders office and the property is yours for the cost
of the assumption fee or if the seller wants to sell badly enough, you may even
be able to get him to pay that.
If you have enough knowledge and experience, any real
estate transaction can be handled safely without the assistance of an escrow or
title company. However, if you have
any doubts at all, use the
can handle every aspect of the transaction including the drawing of all
documents i.e. grant deed, assumption papers; plus provide title insurance, let
you know if there any bonds or assessments against the property; and record any
necessary documents. You can expect
the charge for these services to be in the neighborhood of $500 dollars.
If you are not familiar with the procedures, pay the $500.
If you do it yourself and make a mistake, it can cost you thousands!
What if your income, or credit is not such that the lender will allow you to assume the loan?. Luckily, there are ways to get around and, in effect, assume loans even under these circumstances.. We will discuss exactly how that is done in another chapter on taking "subject to" and wrap around mortgages. Next Chapter