When you’re purchasing homes ‘Subject To’, you want to look for a title company that is familiar with closing these types of deals. Not every title company knows how or wants to close ‘Subject To’ deals, so be prepared to do some investigation before you’re ready to close. When you’re calling around talking to title companies, specifically ask them if they are experienced with closing Wrap transactions, Wrap Mortgages, or All Inclusive Deed of Trust (AITD). It’s best to know right up front if they’re willing to work with you.
Many title companies are used to the term Wrap but not the term Subject To. In reality, they are incredibly similar, and if they can close a Wrap, they can close a Subject To. The only difference being that with Subject 2, you do not record a security instrument (mortgage or deed of trust) in favor of the seller.
If you’re feeling a bit nervous about this part of the home buying process, rest assured that it’s an easier process than you may think. And, after you’ve closed on a home or two, you’ll feel much more confident and most likely have found a title company that can close all of your deals.
What Documents Are Necessary To Close?
The title company is the one that prepares some of the necessary documents for closing. These may include the title insurance, instructions for escrow, and more. I also furnish you with disclosure documents found in my Unlimited Funding Program, so be sure to gather those and take to the closing to be signed.
Two disclosure documents you’ll surely want to have with you are the:
- Due On Sale Disclosure – this document discloses the due on sale clause in the underlying mortgage.
- Statement of Understanding Disclosure – this document states that the seller is fully aware that they are selling their property to you at a discounted rate. This document protects you from the seller later trying to say they didn’t understand the process or the agreed upon price.
Get Title Insurance
Just like your house insurance will protect your home in the case of a disaster, title insurance will protect you in case there are pre-existing issues with the title. As much as you’d like to think the title is clean, it’s better to be safe than sorry. Getting that title insurance will protect you in case down the road a previous owner wants to show up and try to claim ownership of the property. The title insurance protects you, and it protects the lender.
A title company usually acts as the escrow agent between seller and buyer. They will be the ones collecting fees for title insurance and property taxes from the buyer. The last step will be the title company recording the deed at the county records office.
Of course, there are different scenarios with various homes, but primarily the title company will be working behind the scenes and will be well able to assist you with the closing process. This can help you relax, knowing that they’re making sure the transfer of ownership goes smoothly.