Subject-To's & Closings

Travis, where did you learn about "subject to" purchasing?

You had better talk to one of your mentors that you have where you are at and ask them how it is done. Have them provide you with the contracts needed to do a subject to! Why do you want to avoid a closing? You can get yourself in big, big trouble if you do not do this correctly or you do this deal with the wrong property owner. Like when one is in pre foreclosure.

Michael Mangham
MD Home Acquisitions LLC

So, is that a yes or a no?

You can do it yourself if you know what you are doing. Myself, I let the title company do all the paperwork. I don't have the time to file the paperwork with the county etc etc.. I delegate the work to people that can cover me by doing all that is needed to do a real "subject to" deal. In the mean time I am looking for the next deal. This is what I do.
If I were in your shoes (don't know how it is done) I would ask a title company or attorney for an explanation of what needs to be done step by step. What the costs will be so that you can include that in your deal etc etc.
I would not ask here!! That is just me however. Or I would ask one of those mentors you know!

Michael Mangham
MD Home Acquisitions LLC

I haven't found a attorney yet. I already spoke with two and they said that assignments are illegal, I'm acting as a broker/agent and the only way that I can do it is with a double closing. Deed from seller to me and from me to the buyer.

So, maybe I should ask one of my "FREE" mentors, pay you $3500 for this question or search through a couple of forums online for the answer since it never got answered.

Travis, I don't think you have a grasp on the "subject to" process. In a "subject to" deal, the seller deeds the property to you. That's why I asked the question on your education regarding subject to.

So, when it comes time for closing the deed transfers from the A to B and then B to C?

A=SELLER
B=WHOLESALER
C=ENDBUYER

Actually, your question was answered. You asked if you had to go to closing on a subject to deal. I answered above: IF you know what you are doing, No you don't.
I suggested you ask a mentor, not me! However, your learning curve would be about 100% above where it obviously is now if you did work with me.LOL!!(or any other mentor that is actually doing deals) Also, I don't charge anything if you do deals!!

Why would you ask attorneys about assignments when we are talking about a subject to deal? Two totally different animals!

Double close a subject to? A to B anb B to C???? Better get to reading those forums!! Do you know what would constitute a good subject to deal?

Michael Mangham

If you chose to wholesale the property in a "subject to", that is how the deed would pass. But if you are going to wholesale the property, you could do a simple assignment and wouldn't need to purchase the property "subject to". Normally a "subject to" is used if you want to hold the property and rent it out for a positive cash flow or sell it on a wrap around and collect the down payment and the difference between the monthly payment on your wrap around and the payment on the existing loan that was in place when you purchased "subject to". You could also do a lease/purchase on a property you bought "subject to'. If your intent is to wholesale it to a cash buyer, "subject to" is probably not necessary. As Michael mentioned, there are certain procedures that need to be followed dealing with a property in pre-forclosure depending upon the state you are in. For instance, in the state of California, they even specify the size of the type face you use in your contract to purchase someone's equity.

1695.5. (a) The contract shall contain in immediate proximity to
the space reserved for the equity seller's signature a conspicuous
statement in a size equal to at least 12-point bold type, if the
contract is printed or in capital letters if the contract is typed,
as follows:
........
(h) The following notice in at least 14-point boldface type, if
the contract is printed or in capital letters if the contract is
typed, and completed with the name of the equity purchaser,
immediately above the statement required by Section 1695.5(a):

So if you are dealing with a pre-forclosure, make sure you dot your i's and cross your t's whatever state you are doing business in.

Well, I don't know what type of motivated sellers I'm going to attract but, my buyers want "subject-to" deals so that's what I'm going for.

"Subject to" is a method of acquiring property where you take title "subject to" the existing loan. What that means is, the seller deeds you the property and you agree to make the payments on his original loan while the loan stays in his name. This is usually agreed to by sellers who just want out after their credit has already been hammered, payment relief. You are not obligated to make the payments as the loan is still in his name, but the ethical thing to do is to honor your agreement to make the payments. One glitch with this process is the due on sale clause where the lender has the right to call the entire loan due on the transfer of title. But in this market, it is highly unlikely a lender would call a loan due if the payments are being made. The last thing they want is another foreclosure. The due on sale clause was enacted back in 1982 when there were assumable mortgages. The Garn - St.Germain act gave lenders the right to call a loan due on the sale of the property rather than the buyer assuming the loan. The reason they did this was because interest rates were increasing rapidly and they wanted the ability to get rid of a 8% mortgage and write a new mortgage at 12%. But that environment doesn't exist today. Perhaps in the future if interest rates have a large increase, banks will start calling loans due on the sale of a property.

Oh ok. I understand. So, for a seller that has a property that's free and clear, would I just type up a agreement to make payments to the seller agreed with terms and monthly payments since they will be owner financing?

Travis, if your buyers are looking for subject to deals, then they are not cash buyers. If you don't know the legal ramifications of a subject to deal with people who are in pre-foreclosure, I would suggest finding the deals and collecting a bird dog fee rather than exposing yourself to legal liabilities and let your "buyers" be responsible for dealing with the legalities. Stricter laws have been enacted to combat fraud in the foreclosure arena these days. Ignorance of the law is a losing defense in court.

"Oh ok. I understand. So, for a seller that has a property that's free and clear, would I just type up a agreement to make payments to the seller agreed with terms and monthly payments since they will be owner financing?"

That's one way to do it.

And, the buyers I have are cash buyers. They just don't like messing with banks and real estate agents.

If they are looking for subject to deals, they aren't parting with much of their own cash. Choosing not to deal with banks and realtors doesn't necessarily make you a cash buyer. Maybe they are wholesalers posing as cash buyers. I'm just sayin'. Trust but verify.

No, this is something that I know. They have CASH. In the millions.

I know that most people that have cash in the millions don't deal with people that have no experience. Just something to think about. Maybe these people are out of the ordinary millionaires.

Michael Mangham
MD Home Acquisitions LLC

Not at all. I know what he does.