Posted by Stacy (AZ) on November 19, 1999 at 14:56:19:
Scott, I’m inclined to approach my subject-to deals the way you describe, but I try to place myself in the seller’s shoes. Some are concerned that their credit will continue to show them on the loan(s) when they have no legal right to the collateral. I can understand that, and I respond by telling them that my plan is to sell the house and pay-off the loan(s), but I can’t promise how long that will take. If they have a major problem with this, they aren’t sufficiently motivated. But the truth is, sellers in deep trouble are so relieved to have a solution to their problem that this isn’t normally a concern at all.
Recently in explaining to FSBO’s on how I will buy their house, I’ve been pushing for the subject to (get the deed) offer. Well I usually say that I’m showing more commitment to buy their house buy taking the deed instead of a L/O where I would just be renting for a period of time. I also say that I will pay your monthly payment in this case until I have the house sold. Then they come back always with “How long will this take?” and I ask “Well, how long would you like me to pay your payments while I’m selling the house?” After they say “We could go a couple of months” I usually say I cant buy this way unless I’m at least gettting 4-5 years as a deadline where at that time I will either have it sold or I will have to find a way to purchase myself. My real plan would to probably renegotiate for more time once the 4-5 yrs was up.
So my two questions are: How do you all write up a subject to deal with a deadline? I know to say I will buy and really not have the intention of buying is not right but what else could I say to show them that passing the deed to me is the best way to go?
I also offer the Land contract option for them and make it sound attractive as well, but if I have them interested in passing the deed and they don’t have to worry about the payments or getting the house back like a L/O then I’ll take it. Any advice is much appreciated.
Posted by Bill Gatten on November 19, 1999 at 20:27:36:
Hi Ed,
I would only amend what Brad C. (Bradley Wayne Investments) says, by saying: the 10% that Brad suggests the seller hold is forfeited to you at termination, so it doesn’t make him any money or entitle him to profit on sale. However,here’s what it does do:
It give’s him confidence in you and full protection against your doing anything that could harm or jeopardize his interest in his loan or the property; it avoids any clear compromise of the due-on-sale clause (may not be important to you, but will likely be a big deal to him); it gives him a way to quickly (and fairly) terminate your interest if you screw up ('easier to forclosure on your beneficiary interest even than would be a performance deed); it gives him the feeling that you have his best interests in mind and that you are putting his safety and well-being ahead of your own interests.
When I do this, here is what I say. You tell me if this doesn’t drip with sincerety and honest concern for the welfare of my li’l seller buddy:
“OK, Bob (don’t call him that if his name is Farouk or something…obviously), so that you won’t have to take any chances with me, I won’t go on the deed or take any title-interest until I’ve proven myself and am ready to pay off your loan. In the meantime I’ll pay to have the property held in title-holding trust…for you…in YOUR own name. In-other-words, I’ll merely be a co-beneficiary in your trust: you’ll be the grantor and the primary (first) beneficiaery. Further, I’ll take full responsibility for putting someone in the property to handle all the payments, maaintenance, repairs and upkeep; and will agree to guarantee their performance, no matter what…until such time as your loan is retired and the property is fully in my own name.”
And remember… re. the 10% that remains with the Settlor Beneficiary, it could just as easily be 25 or 30 percent, since it’s being forfeited anyway, and since the co-beneficiaries have full tax benefits irrespective of their percentage of “ownership” (i.e., it’s who pays the bill, and whether they own, not how much they own)
Seller could remain on title - PACTrust - Posted by Brad Crouch
Posted by Brad Crouch on November 19, 1999 at 04:43:30:
Ed,
You might consider checking out the PACTrust method of property acquisition and discharge.
If the seller puts the property into a land trust and assigns 90% of the beneficial interest to you, he retains 10% of the beneficial interest and becomnes a “co-beneficiary” in the trust.
The property is recorded in the name of the trust (actually the trustee) and the seller doesn’t have to give YOU title at all. But you still have “control” of the property. The guy who buys the place would get the title, at the time of purchase (after living in the property for a few years - like a lease option).
The PACTrust is pretty cool. Click on the NARS banner at the top of the main page for details.
This is not useful if you intend to flip properties, but would be good for any type of owner financing.
You don’t mention the exit strategy that you intend to use, and without that . . . it’s not easy.
give them a performance mortgage so that in the event you didnt perform they could take the house back.
My thoughts are that one, you arent dealing with a truly motivated seller, or that your presenting it wrong.
I dont go in say I need, I need. I go in saying this "I will buy your house, but first let me explain how I do business. I’m not going to go out and get a new loan, but I will take over your house payments and solve your problem, this is the way I can do it and solve your problem, chances are no other Investor will touch this house for cash(I’m usually dealing with house at the 70-80%). I’m going to find another buyer, and when I do I’ll sell your house. My plan is to get them to refi, but that maybe next week, a year, five years, or maybe never, but rest assured my real profit is trapped into the deal and I want to get paid. As long as you can deal with this then we can do business.
You have to say this with confidence, not go in like you need them to help you buy there house, go in because they need your knowledge to solve their problem and do so at a healthy profit.
If YOU are BUYING “Subject to”… - Posted by Scott (AK)
Posted by Scott (AK) on November 19, 1999 at 14:30:19:
Why would you need to explain to the seller you are going to be looking for someone else to buy …once you BUY it it’s really none of the sellers business what you do with it.
My feelings are that buy expalining your “selling” side situation you are only adding more fuel to the fire for the seller to feel as if you are not really in control.
Just let the seller know you buy houses in this manner and make you payments you commit to…then go out and do with the home as you wish after all YOU did BUY “Subject to”.