If you were the buyer, would the due-on-sale clause be a dealbreaker for you?

I had to read your third paragraph twice. So the buyer is making payments on a loan the buyer is not a party to, and the loan the buyer IS a party to is with the seller, who is a private person. Two loans, one house, and the buyer's only visibility into the underlying one is whatever the seller shows them. That's the part that landed for me.

Not a dealbreaker for me if I can see the underlying loan statement every month. Visibility isn't control, I know that, but it's the difference between finding out in month two and finding out at the foreclosure notice.

marlow, would you take a monthly statement from the seller or would you want it from the lender? A screenshot from the seller is a screenshot. I've been told some sellers will set up read-only access or have a servicer send the confirmation directly, which is a much better version of the same assurance.

Voted for the refinance deadline option. The wrap is a bridge, and bridges should have a stated length. Five years of open-ended exposure to someone else's mortgage is a different bet than two years with a balloon and a plan.

The clause itself is worth actually reading in the seller's note, because it says "may" and not "shall" in most standard forms. The lender's option to accelerate is not the same as an automatic event. Whether a given lender exercises it, and what remedies exist if they do, turns on the document and on state law, so an attorney in the property's state has to look at it. I'd also want the wrap note to say what happens to my equity if the underlying loan is ever accelerated, because standard forms are silent on that and silence favors nobody in particular.

In the rural markets I look at, a lot of the underlying loans are small local bank paper rather than a big servicer, and small banks pay attention to their portfolio in a way a national servicer sometimes doesn't. Cuts both ways. They might call it, or they might just want the payment and not care who sends it. You cannot know in advance, so I wouldn't price a deal on the assumption they'll shrug.

The document detail I look for is the escrow account. If the underlying loan escrows taxes and insurance, then the insurance policy on file with that lender is in the seller's name. When the property transfers and the buyer puts their own policy on it, the old lender can find out through the insurance carrier long before anyone checks the deed records. That's the path that actually surfaces these transfers in practice, and nobody plans for it because everyone is watching the recorder's office. Recording practice varies by state, and so does whether a transfer is visible at all, since a dozen or so states don't make sale prices public.

fathom, that's the most useful thing I've read in this room. The insurance carrier tells the lienholder because the lienholder is named on the policy. Of course it does.

Dumb question I'd rather ask here: if the lender did call the loan, does the buyer lose everything they've paid in? Or is there a process where they get a chance to pay it off or refinance?

compass, acceleration means the balance becomes due, and what follows is whatever foreclosure process that state uses, which takes months and in some states much longer. There's usually time to refinance or sell. What you don't get is a guarantee, and what you'd want in the wrap note is a written cure right and a stated remedy for the buyer's equity. That's document drafting and it needs a real attorney in the state.

I'll be the dissent. Voted dealbreaker. Not because I think a lender is going to call the loan next Tuesday, but because as the buyer I'm accepting an exposure whose entire mitigation lives in someone else's discipline. I'm a few deals in and every problem I've had has come from depending on another party's behavior. Wraps concentrate that.

keystone, if you rule that out, what's left for someone who can't qualify conventionally right now? Genuine question, coming from zero here.

ember, renting another year and fixing the qualification problem is a legitimate answer, and it's often the cheaper one. It's slow and nobody wants to hear it. From the lending side of the table, the thing I'd notice is that the wrap buyer is paying an above-market rate for the privilege of skipping underwriting, and that premium is real money over five years.

Voted for the seller-disclosure option. If a seller won't hand over the underlying note, the payoff statement, and the current escrow analysis before I sign, I've learned everything I need to know about how the next five years go.