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hey guys welcome back my name is Leland baptists I am one of the private bankers with Lee Chandler and today we're gonna talk about something very very important we're going to talk about how to assume mortgages all right if you're not sure what that is a brief description of assuming the mortgage just means that you take on the responsibility of a property or properties and in exchange for that the owner at that time will also believe and give you ownership to that particular property all right now one of the other benefits with that is that you're able to assume or take on the responsibility of a property with very little resources out of pocket that's a material equity and connections and so forth okay now the reason that someone may be interested in allowing you to assume their mortgage with especially their property is because either they're moving they're in dire straits possibly they're having that management search of the property this can happen for commercial property as well as residential today we're going to speak one mainly the process for residential it's a little easier when it comes to doing it for commercial so it's a lot more difficult for residential depending on what type of mortgage instrument was attached to the property so we're going to kind of go over the adjust of it and if you guys have any questions please comment below from alcone in more detail all right so first mister over here to the left-hand side so the very first or the primary important thing when it comes to assuming a mortgage is really figuring out with it whether or not this seller the individual who was currently on the mortgage that person has to house it and it's technically deeded to them you know really just want to see if they are interested in and long units in the mortgage now most people will actually consider this to be seller financing most most people most people would consider this beeps seller financing because most are not familiar with assume the mortgage a more essentially what you're doing though is you aren't taking over the property in conjunction with the mortgage so it's like a rap or people make may be familiar with with the wraparound and so forth so if someone is looking just to walk away walk away from that particular property commercial residential that maybe can't a good candidate now the other thing too is that you have to at some point in time we see a quitclaim you can do this one of two ways you could go about filing a quit claim and recording it yourself your local county office your county recorders office or we can go to a local tile company and they would actually facilitate the closing of the transaction my Dennis mentioned earlier when you speak with your title AJ doing use the verb the verbage or the jargon of a rap and not necessarily a single mortgage okay this the third thing is certain sellers on some people are more motivated than others and if someone is not as motivated to just simply walk away at that point one make sure you have some type of payment agreement or a promissory note in hand for the individual so the promissory note could say anything it could be $1,500 it could be $15,000 it solely depends on the transaction the individual and their motivation okay then the last thing that's important too is power of attorney the reason that you have to have power of attorney for most of for most mortgage assumptions or raps is because you want to be able to speak with the what that's what the bank on behalf of that selling for that individual okay so think about this if you're if you're doing this if you're doing a rap or it's in the mortgage at some point in time you're gonna have to pay the mortgage right you're gonna have to pay the taxes the insurance and so forth you're gonna need power of attorney and all these documents have to be notarized during the power of attorney so they're able to call the bank on that person's behalf so now you're able to negotiate or pay paying the bank and so forth the pain it's catch catch catch the property up in the morning shop or and on the payments and so forth so these items are key so I'm going to say it one more time a quick lane all right a promissory note if necessary depending on the motivation and the last not least also part of the time all right once you have that in place at that point you can begin to go ahead and get in contact with that particularly limit or the map type of bank now most individuals who have a mortgage on properties they normally have all the paperwork if the seller does not have well all people work at that point you can contact the bank directly on behalf of this individual pasilla alright once that happens you can request you can say hey listen I need to have a full documentation of the mortgage right I need to have a full documentation of the mortgage and the note and what are you looking for you're looking for clauses all right clauses and you're also looking forward this is assumption now I can tell you this for most FHA mortgages assumptions you will not find an assumption clause all right and if you do find anything about functions it's gonna say no all right but there's slow way around that as well so don't fret about that okay but we want to do is you want to go ahead contact the bank and get the entire mortgage or loan documents okay now the mortgage normally it's going to be 40 plus pages depending on on on if it's every change gonna be pretty pretty pretty lengthy if this conventional not as lengthy if it's commercial real estate normally those sort of like five or ten pages okay so the document may be this small I'm going to put maybe this big you need to take time out and look through that document if you you know you're skimming through it then let's go go through the table of contents and look for anything in reference to us assuming that loan okay now the third thing you are doing is one look to find out what is the late or great grace period for that particular law all right every loan is different especially if it's a commercial real estate but if it's much better that's all normally your grace period it's gonna be a 15-day window so what that means is if the mortgage payment is due on the first it may be considered late by the third or the fifth okay but they'll give you a grace period up until the 15th so that means that although you know it may be considered as late on the third or fourth or fifth they may not apply any of the late rules or standards to that individual or that seller until the 15th now once you find this out it's going to help you out a lot okay let's keep in mind the only perk the only reason this individual is walking away from this property is because it asked me some kind of motivation and normally some type of distress attached to that property so it's important for you to know how long you're able to stretch that great speaker okay and the last but not least let's talk about getting getting around that assumption a little bit now depending on on how the mortgage is written in the class today you'll find out that they will that most ninety ninety percent of mortgages allow you they don't they won't allow you to assume if it's residential and it's definite change so important but they will allow you to put that property in a trust okay now you have to look on your particular mortgage document to figure out what type of trust it could be living trucks here irrevocable trust what type of trust is it okay and when you have power of attorney you're able to speak with the bank to find out exactly what type of trust is allowed once that takes place you need to establish that trust you need to record it and then at that point you need to marry these two okay and you can marry these two now when you have a trust you as the individual can they become the trustee of the trust right and then you're the trustee of that particular trust on behalf of the seller now as a trustee you have full control depending on how you write it right can you light up the trust you would have for control of the property and anything in reference to the property certainly it's the silver parts of the property taxes liens you'll you'll be in full control one of the be one of the people things with this is a u.s. individual you have control but if something were to go wrong you you don't have a lot of liability on you technically all the liability will actually be able to trust okay the liability will not be on you as the trustee you're a look that you looked at that's more of a manager I'll basically say someone to you being on the portfolio manager or stock manager for let's say Charles swab or or a huge program of that you're managing the portfolio when that trust if that trust were to go under you would still be unscathed you'll see begin still be alive alright so nothing that ever happen to you your credit wouldn't tell me nothing like that alright I didn't know what happened is that that trust which is an entity which technically isn't even the person that trust within either either be dissolved revoked foreclosed on etc etc yeah now let's talk about servicing alright so we'll talk about servicing this is like super important every mortgage company every bank every lender has a servicing company and it's the servicing companies job normally to receive the payments that individual makes those payments could could have tied to it mortgage taxes insurance and other things right PMI and so forth so they're going to collect the payment and then there's only little collect payment from you the trustee of that trust and then they want to disperse those payments they're gonna suppose payments to the lender for the mortgage and interest during the suppose payments to your local county for that property for the taxes and then when its first payments to you or you call up your insurance policy with your insurance agent or you know whoever you had been showing to it okay and then normally what happens is that they were actually hold that money if it's not that if it's not needed for in taxes or their elves they'll hold that money in an escrow account until the the agreed disbursement date okay so you may have a county that system listen to only pay s you know twice a year well don't go hold that amount in an escrow account what you may have insurance that says hey only pay us once a year right on this month or whatever and they'll hold that in an escrow account when you're getting power of attorney you are then able to figure out how much is left in the escrow account or are you missing the kitty right because what that means is that if you normally this normally there's always money left in the escrow account that because of insurance and so forth and what that means is that if this person was in distress and if they were behind behind when their payments will say two months if they win you catch them up right on their payments there should be some type of money in the escrow account that will also benefit you now sometimes manthang wait you know couple months maybe a year twelve months maybe five months whatever before you can gain access to the escrow account but their benefit with that issue is that your knowing that hey in the five months even have another take of cash they've been applied to the mortgage or to the upkeep of the pocket all right see also keep that in back in - what when it comes to the residential so now that you've Oh awesome so this is purporting when you're gaining power of attorney and then you let the lender know then you are the trustee of this individuals trust okay they will be willing to negotiate with you as far as a payment arrangement all right because the way they're doing it is in viewing it as someone is coming in and someone is stepping in someone's being the quote-unquote white knight for this transaction or for this deal of when its properties asset and now they're saying hey this individual is saying that they want to go ahead and get things back on track right and you say hey that this is why I'm the trustee because I want to make sure that this asset doesn't go under or this assets the living in distress so that point rate was negotiated with with the lender or with the bank to go ahead and have different terms and also you know cash back on catching back on those payments so now that we have that established let's go together to talk about increasing the income for this particular asset okay like I mentioned earlier this could be this could be a three Plex it could be a commercial building it could be residential building whatever it is all right there's gonna be a few ways that you're gonna be able to increase your income keep in mind there's one thing that it's going that it's going to remain constant and that one thing is going to be your mortgage that mortgage is going to remain constant unless you've negotiated special payback periods and payback amounts with the particular lender okay so the first thing here is we focus on is taxes now the pinnacle in your accounting some counties are lenient sometimes are not but you can in fact actually challenge taxes and and it's not gonna be in immediate fix what may happen is that you may have to wait to the next cycle but what's that next cycle takes place you'll be able to have a lower taxation okay look at taxes and that doesn't always work but that's but it's a strategy that you can use okay because what that will do in the long term is it's gonna increase for an escrow account you're gonna end up either getting that money back or have that money apply it towards you want your your monthly mortgage okay second thing is insurance when you're a power of attorney and you're the trustee over over this this property and over this loan you also have the ability to see who the insurance is with and one of the greatest benefits you can do is if you work closely with an issue do you have them look at you at that that existing loan that excuse me that existing insurance policy and you can actually speak with a licensed insurance broker and how the individual look shop for you a cheaper cheaper insurance policy based on the requirements that the lender has okay so the meets the requirements for the lender and it's cheaper that's a great way for you to save additional money all right because keep in mind you're one payment is going to the servicing company and then the certain company is included in an escrow account we're saying this process is to that insurance policy well and this is going to be cheaper this time but what happened over the what happened next next year or the next month is that eventually your payment that's what it's going to be less okay and of course that increases income for you if you're renting that's property out so which one's destiny birth three which is rinsing all right which is empty now I've seen it done in multiple ways I've done it I've done it in different ways as well you can either rent the property out to individuals all right which means you have leases or you can actually do what's called a lease option for that particular property all right as the trustee of that asset this truck is interesting of that trust you can lease that property out as a trustee of that trust didn't how you how you like me to get trust written up you can sell that asset okay you can you have the full control as if you know you built it yourself you have full control all right so you can release that party out you can lease it you can rinse it you can do a lease option you can sell it if you want it see all that stuff okay in real quick the reason that most people don't end up selling the property when they make when you go this route initially is because unless the the area has greatly appreciated it's not worth selling okay and the other thing too is keep in mind this person walked away for a reason all right if if this property if this property's value was was less like $200,000 and it had a loan let's say $50,000 this person went to walk away this place will need to keep it or they were to sell it all right for profit now a few money to someone who is ignorant to you know their capital stack then you know then like my all means I'm just going to sell that but normally what happens is is really situation where the property's worth $300,000 and the mortgage is two hundred and eighty thousand dollars right and unless you sold it at three hundred thousand dollars in the markets at that same price and all that stuff you know you know when we were selling it lastly if you have capital gains on the crap alright so the next thing is increased income will be your deposit so we're talking about mental deposits now and not only fundable deposits okay good way to increase income and then finally down payment if someone's doing a lease option or lease options are purchase then your down payment may be a lot bigger you don't pay your down payment could be five thousand dollars it could be ten thousand dollars okay at that point what that does for you is that allows you to go ahead and catch up almost payments that that property is behind hopefully message if that's what you're doing if not it just means additional cash for you as a trustee or perhaps a trust okay alright so this particular asset how are you gonna maintain it well you if you're doing a lease option depending on how you write the lease option you could have it to where the tenant takes care of the maintenance all right so there are some leases and some lease options where the tenant cuts the grass with a tenant things the gutters with the tenant you know takes out the trash and all this stuff okay whatever you put in paper and if two people agree on it that's what it is okay as long as it's ethical and it's not you know anything crazy but if it's in your lease or your a lease option that the tenant is going to cut the grass and great because certainly things can help save on property management if you to use it I would definitely suggest that you use a license trustworthy puppy management company or manager but as a backup I would try to put as many things and your lease or your lease option to win a lieutenant I would actually take care of that asset okay and then last but not least we have one line management I want to say one of my mentor here primarily for for payments okay so instead of having someone come to your office and drop off your checks and people be you know people are on your business at work and things like that I would suggest that you go ahead and have online management it's where they have a portal they can they can go ahead it and pay money directly into that portal and you can use PayPal you can use at folio which is a good app for real estate holders and you can use you know tons tells other things okay you can be as creative and as you want to you just make sure that this individual when they pay and we see a confirmation and receipt all right any questions um so you're saying if the seller is just walking away you don't necessarily go through the same if no you you want to go through these steps the only thing is that and the sellers walking away right and they are living like walking away you most I think you don't need a promissory note okay because there's no need to promise them anything or to give them any money and people they just want to walk away and you'll meet people who honestly just don't walk away this could be someone who's moving to another state and just got divorced it could be someone who you know may be property in Indiana but you know the grandfather is sick and floor back and they will be able to need to go you know and they know what the headache of take care of that property it could be something to where they believe one leave but they they're afraid that if they leave who's gonna pay that mortgage right that's a that's a fear too they could be afraid [Music] that you know they can't do both both mortgage payments and all that stuff and so what a negotiation tactic could be hit listen I can take care of this mortgage but if I pay you this amount you want today down however I'm not to be able to pay the mortgage and gave you money the same time so because of that you know it has to be either/or and it's it's in our best interests it's an our best interest that I go ahead and take that money and use it to pay your mortgage that way there's no scams and your record and things like that so you can only think that as negotiation tactic say hey what are the questions like yeah tells her that that was really the biggest one of us trunk girl different somebody later yeah and I know it sounds weird people actually walk away yeah that sounds weird cuz will happen is your whether you run into something where there'll be a husband and wife and the wife and the kids are in Illinois and the husband is only staying in Indiana solely because he has been mortgage he wants to make sure you take it takes care of the property right and he and because they're so strapped for cash that he can't pay anyone to take care of the lawn and all that stuff so go he'll just live in it whatever you know I father separated her she couldn't she could've got a new job he didn't that kind of thing so yeah you'd be surprised so he's like well hey you know we didn't move because I have a job here and I'm there I want the job there and if I if I do move there we can't be both mortgages or both went payments all that stuff so you'll be surprised so one question so the situation with the bank do you need to do that first before you decide to go forward with some mortgage so here's the cool thing everything here even though it could be in writing this is under this is contingent upon being able to assume because like I feel because like you know we can write up a promising you know with with this seller and you can be in reference to this apartment but if the banks not gonna allow if in waiting I mean so normally people have their mortgage documents if they don't have the mortgage documents you are gonna have to get those mortgage documents the only way of Bank is gonna allow you to you will so we're up so what about Linda was headed lenders will allow you to pay someone's mortgage like no questions else I could call Joe Blow I could call Joe Blow and and I could pay his mortgage today and a Linden would not care you know money is good great fantastic but I wanted to ask about Joe Joe blows mortgage history or his most recent payment right you wish would be mine they want what he give you that information unless I have power of attorney or unless house of trustee of his trust super weird right so the bank will allow you to pay basically the bank will take in money but don't give me a giving information unless it's a written format so you would have to have this first before you can even find out what's going on here okay unless this person has those documents over and you know if there's someone who doesn't even have those documents I'm telling you this person is more is more than the walk away [Music]