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Subject To


This packet includes the following documents:

  • Residential Purchase Agreement
  • Seller Acknowledgement and Addendum to Purchase Agreement
  • "Due on Sale" Clause Disclosure
  • Limited Power of Attorney
  • Seller's Disclosure Statement
  • Authorization to Release Loan Information
  • Authorization to Release Insurance Information
  • Lead-Based Paint Disclosure Form

This packet is used by:
The Subject to Existing Financing Package is used when you are buying a home subject to the
existing financing on the property. This differs from the Contract for Deed and the Wrap, in that
the Buyer takes over the existing loan payments directly and there is no separate loan
"wrapping around" the underlying loan. The Seller conveys title to the property in exchange for
an agreement from the Buyer to timely make his or her mortgage payments. Sometimes there
is also a lump sum upfront payment as well for any equity in the home. This is a great strategy
to control a property without having to qualify for bank financing or come up with a large down
payment. It can also be very advantageous for a Seller who is having trouble sellng or
meeting the mortgage obligations.

The Documents:

Residential Purchase Agreement
The Purchase Agreement defines the terms of the sale. Generally the material terms of the
deal have been struck orally with the Seller, at which time you should sit down and fill this
Purchase Agreement out and review it carefully with the Seller. It is essential that you obtain
accurate and up to date information on any financing that exists on the property and any other liens, so that all such amounts are reflected in your purchase price. The Purchase Agreement
gives the Buyer the right to request and review all documentation necessary to verify the terms
of existing financing and liens. All such documents should be reviewed carefully.

Seller Acknowledgement and Addendum to Purchase Agreement
The purpose of this document is to provide further disclosure to the Seller of the
consequences of a "subject to" deal. It is important that the Seller understand that they are
conveying title of the property to you, but are remaining liable under their current mortgage.
They are now relying on you to pay their mortgage and run the risk that, if it is not timely paid,
the house could be foreclosed and their credit could be negatively affected. Because of the
nature of the transaction, an unscrupulous Buyer may take advantage of an unknowing Seller.
Although you are not the Seller's financial advisor or attorney, it is important that you disclose
to the Seller potential risks of this kind of transaction and advise them to seek their own
counsel and advice.

Due on Sale Clause Disclosure
The purpose of this document is to provide additional notice to the Seller that this sales
transaction will trigger the "due on sale clause" of the underlying financing, giving the Seller's
bank the option of calling the Seller's entire mortgage due. If the Seller cannot pay the
mortgage, and if the Buyer cannot find other financing, the bank could foreclose and negatively
affect the Seller's credit. This document also limits the Seller's remedy to retaking title and
possession of the property in the event of the Buyer's failure to make timely payments.

Limited Power of Attorney
A Power of Attorney ("POA") is a written instrument that allows the Seller (the "principal") to
authorize the Buyer (the "attorney-in-fact") to conduct certain business on the Seller's behalf.
There are two types of POA; "general" and "limited." A general POA gives the agent very
broad powers to act on the principal's behalf; and a limited POA limits the agent's authority to
act only on certain matters. Every act performed by the agent within the authority of the POA
is legally binding upon the principal. The POA included in this packet is a Limited Power of
Attorney. The Seller gives the Buyer authority under the POA that is strictly limited to dealing
with the property. In fillng out the POA, you needs only the names, date and property
address. It should be signed, witnessed, and notarized.

Seller's Disclosure Statement
When sellng real propert, the Seller should complete the attached Seller's Disclosure
Statement and provide it to the Buyer. Make sure it is completely filled out to the best of the
Seller's ability. This disclosure may identify material defects or needed repairs that might
affect the purchase price. However, it is not a substitute for a thorough inspection.
Borrower's Authorization to Release Loan Information
This form is sent by the Seller to his or her mortgage company expressly authorizing the
mortgage company to speak directly with you, the Buyer, about the underlying mortgage and
receive copies of any documents you request. This should be sent in by Seller as soon as
possible and receipt verified.

Authority to Release Insurance Information
This is a form sent by the Seller to his or her insurance company. Sometimes there are
significant issues that arise in "subject to" deals regarding insurance. The Buyer does not want
to have to pay for a duplicate policy in the Buyer's name, but the parties do not want to send a
red flag to the mortgage company that the propert has changed hands. This form changes
the homeowner's policy to a lender's policy and adds the Buyer as an Agent with full authority
to transact insurance business on the property.

Lead-Paint Disclosure Form
Housing built before 1978 may contain lead-based paint. Lead from paint, paint chips, and
dust can pose health hazards if not managed properly. Lead exposure is especially harmful to
young children and pregnant women. Before sellng pre-978 housing, sellers must disclose the
presence of known lead-based paint and/or lead-based paint hazards in the dwellng. An
approved form has been provided in this package. The information should be carefully filed
out and the Buyer given a copy. Keep a copy for your records.