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Taking title subject to existing loans..

Posted by Ward-CA- on May 13, 2002 at 7:16 AM

In Reply to: Equity Buyout posted by C.J. on May 12, 2002 at 11:21 PM

: If you are able to "buy out" iwner indefault....how to you treat the existing loan. Do you re-finance the house? Assume the loan? How is the LTV calculated...does the lendor use your purchase price as the FMV?

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Most pre-sale buyers take title to property in foreclosure subject to the existing loans. If we are going to “flip” the property as fast as possible, then most of us won’t assume the remaining loans and we won’t refinance either. Why bother when the existing loans will be paid off through our resale to someone else so soon?

However, if we intend to keep the property and rent it out then we have to get creative with holding title without tipping off the lenders on the remaining loans that a sale has taken place, giving them the right to call the loan(s) due if they should so desire.

Most lenders will calculate their loan-to-value based on the purchase price we bought the property for rather than its truer and higher, fair market value.


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