Calling all 'subject to' Pro's - Posted by Taylor

Posted by Taylor on December 11, 2000 at 02:03:39:


Calling all ‘subject to’ Pro’s - Posted by Taylor

Posted by Taylor on December 09, 2000 at 12:41:21:

I’m new at this. I’ve been studying this board for about three months and these questions I haven’t been able to find a clear answer to in the archives. Any and all constructive answers will be greatly appreciated.

(i)When buying ‘subject to’ the existing loan is this a formal transaction that closes at an attorney’s office or a title company? Or should they just be used for researching the title?

(ii)Are there special purchase contracts that should be used on ‘subject to’ deals?

I also want to say THANK YOU to all who post on this site…whether a newbie or a seasoned veteran. Reading the answers to newbies’ questions have given me a good understanding of this thing called CRE investing and the post by the veterans are constantly sharpening different techniques. Thank you all.

Re: Calling all ‘subject to’ Pro’s - Posted by B.L.Renfrow

Posted by B.L.Renfrow on December 10, 2000 at 10:12:31:

As the posts below indicate, the “closing” can be done in an attorney’s office, bank or a Burger King. I usually use my attorney’s office because it’s convenient, and it ads an air of legitimacy, for sellers who are concerned about such things. But the attorney himself doesn’t participate. Rather, I just meet the sellers in his waiting room, and his secretary notarizes all the documents requiring the seller’s notarized signature. But prior to that meeting, I have already met with the sellers and explained the procedure and gone over the documents they will be signing, so there are no surprises at the last minute.

However, I’ve also done it at an empty property at 9 p.m., while bringing along a notary friend.

I usually – though not always – have the attorney review the title and prepare the legal description and the deed. On a few clean, straight-forward deals, I have done it myself, though I knew well what my risks were. I wouldn’t recommend the do-it-yourself course for a beginner. In many states, this can be handled by a title company.

You can use any purchase contract you want, but it should indeed contain a couple of provisions specific to subject-to. I use my own purchase agreement, which has been blessed by my attorney. One of the clauses I include for subject-to deals is:

“…Seller understands and agrees that this sale is contingent upon Purchaser’s verification of certain items and conditions, including but not limited to, balance due on underlying loan(s) and absence of undisclosed liens against the property. If this sale does not accomodate Purchaser’s business plan, at the sole discretion and determination of Purchaser, this Agreement may be terminated by Purchaser with no further obligation on the part of Purchaser or Seller. Seller understands this transaction is not completed until deed to the property is recorded by Purchaser.”

Naturally, the usual caveat applies: before you use anyone else’s agreements or clauses, they should be reviewed by your attorney to assure they are valid in your state.

If you are using land trusts, Bill Bronchick’s courses are a must-have.

Brian (NY)

Re: Calling all ‘subject to’ Pro’s - Posted by dewCO

Posted by dewCO on December 09, 2000 at 19:00:17:

Not sure what Houserookies’ anser means, I’d never use that language, but Wm. is correct. When the seller signs the contract and the deed, which you have notarized as they sign the deed, that is it!!! You have just taken the property subject to. (Look and purchase contract.)

Whether or not you then “accept” the property by recording the deed, making yo the owner is up to what you find out upon your further investigation and title work that you get. You want to make sure there are no other liens or encumbrances other than what they have told you, all of which are spelled out int he contract and the contract further states that if after you finish your investigations within 7 business days, and the info. the sellers gave you doesn’t check out then you will return the voided adn unrecorded deed to them and the whole deal if null and void. That’s so you don’t get burned by a lying seller.

Re: Calling all ‘subject to’ Pro’s - Posted by Houserookie

Posted by Houserookie on December 09, 2000 at 16:22:46:

At the bottom of the addendum, I make sure to include:

“If there is any misunderstanding with the above clauses, please sumbit in writing within 24 hours.”

Re: Calling all ‘subject to’ Pro’s - Posted by WilliamGA

Posted by WilliamGA on December 09, 2000 at 14:13:32:


  1. Yes, you can use an atty to close a subject to deal if you like. I rarely use one unless I am buying with the bank’s money. I do most all of my subject to closes at a Kroger (that is a supermarket chain here that has a 24 hr notary) or a bank. Anywhere that has a notary will do. You should however have a good understanding of the documents involved before doing this yourself.

I would recommend finding a good RE atty and showing him the documents that you are planning on using and getting his input. Thats what I did and it was really helpful.

  1. You can use any standard purchase agreement to sign up a subject to deal but you should attach a “subject to” addendum. This will spell out in greater detail the terms of the purchase as well as once again getting acknowledgement from the seller that he knows that the loan will remain in his name. Just a good idea for covering your assets.

Hope this helps you,