Buying Property: "Subject To"

All of the posts and even the inquiries were informative for a newbie like me. What appealed to me the most was Sharon's entry. I was able to understand it so easily. Thank you everyone! Aloha!

Just a question, why the bank issued the check to the seller instead of you. And to whom you gave the downpayment to the seller or the bank.

max

Hi DG Family:

I want to thank Lloyd for explaining how he negotiated his deal to satisfy the 20% Down Payment to avoid PMI with only 5% out of pocket. You made it easy to understand for this Newbie.

Sincerely,

DekWort

I am working on a deal subject to the existing financing. What I am attempting to do is buy the home subject to assuming the existing note. The bank is seemingly wanting their cake and eat it too. As I work through this I hope to get the home for around 93000 with about 10K in fix up the end value is around 155-160K I will try to sell for around 140K

Keep bring the information folks

Thank you Fred E

The bank issued the check to the seller because it's his house that i was buying. The downpayment was given to the bank since they're the one is financing the house.

Lloyd

Glad i could make it more understandable for you. Good luck in all your real estate endeavors!

Lloyd

What forms do you use for a subject to deal ?

Does anyone know if 'Subject To' is acceptable in the Houston, Texas area? This sounds like a great way to acquire a property along with 'assignments' and 'lease options'.

Earl

I am putting a link here that will give you some additional info regarding "Sub2".

Starting in Jan '11 the SAFE ACT will go into effect changing things. If I understand all of this correctly, You should still be able to buy "Sub2" as long as the seller has not done seller financing (Sub2 constitutes seller financing) in the last 3 yrs. But then you would need to either sell it outright and payoff the loan or hold and rent or do a L/O. You could not do a further "Sub2" to third party unless you have a person (I think called a mortgage originator, tells in this link) handle it.

Should be able to do it anywhere, I think, but ck with an atty in your state.

http://www.deangraziosi.com/real-estate-forums/financing-and-credit/6550...

Karen

I wonder though if the new SAFE laws has actually negated the Subject 2 deal, or has it simply changed it up a bit? Some say buy subject 2, sell L/O... It is a bit scary for a newbie to not be sure what is safe and what isn't...any current information or updates on this SAFE ACT?

Thanks,

Got a another question, I have a house that is free and clear worth 15k, can't sell it because my brother has half interest in it. He wants 6k for his interest and he is out. I have an investor that is willing to loan me the 6k, because I want to sell it to an end buyer. How much interest is reasonable to pay the investor until I sell and also what forms do I use to gaurantee the investor his money. If I use the house for collateral, would I use a subject to clause in a promissory note or what? Thanks

I've seen a lot of others in this post asking the same question again and again but nobody dares to answer clearly. so am going to do it again what are the set of contracts to use for the Subject To .. Deal dose anybody can answer? are them into the DG contracts or you need to find'em or down load'em somewhere else? can somebody please answer the QUESTION"""""""""""""?

Zeklon, you have two choices... to sort it out in the purchase or to specify it on title. You'd handle that differently.

I'd just use a standard purchase agreement, then you could add a seller financing addendum.

OR you could hold title in a "wrap around" deed... also known as an "All Inclusive Trust Deed"... that way the seller would still be obligated to the mortgage and not send any red flags to the lender. AITD's were popular in the 1980's... I used one then to buy a house.

Your Title rep would be the one to help you get the deeds in order.

Zeklon, you have two choices... to sort it out in the purchase or to specify it on title. You'd handle that differently.

I'd just use a standard purchase agreement, then you could add a seller financing addendum.

OR you could hold title in a "wrap around" deed... also known as an "All Inclusive Trust Deed"... that way the seller would still be obligated to the mortgage and not send any red flags to the lender. AITD's were popular in the 1980's... I used one then to buy a house.

Your Title rep would be the one to help you get the deeds in order.

That was great stuff, havethat technique in the arsenal and hearing this makes me wantto buy up the town

Hello I'm looking to network with anyone interested in getting things going I'm located in the state of virgina and i see a ton of potentials here.

Sully, to add to what you are already saying, there are some instances where Subject To are particularly risky. One particular area is where there are VA loans involved. Unlike banks and mortgage companies who may not check the titles on their properties as long as payments are being made, the VA has a system that routinely and frequently checks the titles to properties on which they have guaranteed the loans. They do it as often as about every 60 days. When they find situations where the titles have been changed, they will call the loans. Most times what they will do is send a notice to the original borrower giving them a short window of time (typically 30 days) to reverse the process and get the title restored back like it was. If that doesn't happen, then they can and will call the entire loan due. So be very careful.

I almost did one of these until I passed it by my attorney and he let me know how the VA works on their loans. I then checked with two other attorneys just to be sure that the first attorney knew what he was talking about and they all agreed with him.

In this particular case, the sellers had a VA mortgage (wife was in the military) which was underwater. They initially offered us $30K to take over their property. But that wasn't enough to bring it above water and make it worthwhile. So we continued negotiating the amount. Meanwhile, we were looking for the best way to structure the deal if we could agree on the amount of cash they would be paying. First looked into "Subject To", but quickly learned from the attorneys that wouldn't work given the VA involvement in it. Then considered doing a land sales contract where the title wouldn't be changed until we were ready to take out the mortgage altogether, but couldn't get an attorney to sit on the land contract without recording it. They said that if we didn't use an attorney in the transaction, that we could do whatever we wanted. Would love to have been in a state where the transaction could just be handled by a title company, but in South Carolina ALL closings have to have an attorney involved -- even those being run through a title company. An attorney still gets in the picture at the title company, so it doesn't work here. After a period of negotiation, we couldn't reach an agreement on the amount anyway, so both sides agreed to walk away from the deal.

If there are any other investors here from South Carolina, would love to know what you might have done differently.

Hi Sully,

It's really an interesting strategy. My questions are:

1. In your example, Mr. Seller asks for money so he can move out. Investor gave $3K. What if the investor(novice, no money) has no money to give? Is there any way around that?

2. What are the contracts to use for Subject-to's?

Thanks!

Marizel

I learned that some loans cant be assumed. How do I know which loans could be wrapped?

Marizel,
I have the same question, but I haven't seen any posts from Sully in a long time. I'm not sure if he's around anymore. Good luck

I'd suggest that you try again to get your brother to cooperate. That would be the easiest and cheapest way to do it. You may tell him that if the house doesn't sell within a certain period of time, you will then take him out with a loan on the property.

If he won't budge, then you can get your investor to make a loan on the house. You will need to do an escrow with either an escrow or title company because you will want to take him off of the title and your investor will want to record a new first deed of trust against the property. The escrow or title company will hold the money from the investor and not give it to your brother until he signs the note and deed of trust and records the deed.

Because it is only a 40% loan to value, the loan is not very risky - the lower the risk, the lower the interest rate. I'd guess that you only need to offer something around 8%, which is probably similar to other investments your investor could get on his money with this little of risk.

Good luck.

Unfortunately, Sully has been gone now for a couple of years. We miss his wisdom and his quirky sense of humor.

Sully-
You did a fantastic job of writing up how to do a Sub-2, made me feel like I was right there while it was happening and simplified it so no one should be afraid to attempt to go find and do one! BRAVO!

By the way, in case you're reading this and have never done one, they really are that easy. AND . . . if you find a truly motivated seller, sometimes THEY will be the ones trying to beg YOU to do the deal!

I basically have been handed a condo to sell. I am just starting and have no capital yet. This seller is interested in buying a property in Idaho Falls ID to be near family. Her Daughter who is living with her is finishing up school in the next 5 months that might put a hold on Selling the current property until the daughter has a place to move to. any Ideas? contact me also at kstonya2526@****

First of all, make sure you give yourself sufficient time to subdivide the land. It's a buyer's market, not a seller's market, so unless the land is in a tremendous location with many buyers lined up, ask for lots of time with lots of contingencies.

You need to meet with your city or county's planning and zoning department to discuss the zoning and what is needed to be done to get the property subdivided and the related costs. You will need a good civil engineer who can help you walk through the process-for a healthy fee. You will need to do a soils report, subdivision map, survey, etc.

Anyway, in your purchase contract, put in a provision that will allow you to place a sign on the property even during the due diligence period. Your potential buyers will include neighbors and friends of neighbors who will drive by.

You can also advertise to sell the lots individually, and contact builders in your area to see if they want to buy them. You may want to offer a discount if they buy all 8.

Good luck

Thanks for these great tips.

My goal in my investing carreer is to have a seller pay me to purchase their property.

Really!

I have purchased them for free, but I haven't been able to get them to pay me to take their property yet. But I will keep aasking.

Anytime you are working with a motivated seller anything is possible.

Now some of you might take that the wrong way. I'm not out to take advantage of people. I don't do business that way. Every deal I do is with honesty and integrity. But if it makes sense for both the buyer and seller and they are willing to pay me to buyer their home, that would be just awesome!

Mikessler
keep moving forward

i read very carefully through it all..it all made since..im so willing to start the precedure.

Sully,
I like the way you explained the details of how to do a subject too. Very clear . When a deal does not have enough profit to hold it,you can find a lease option buyer and just assign the contract(kinda like a wholesale deal) for a quick $5 or $10,000 and move on.

Success to All
John Wakefield