Not Understanding 'Subject To' - Example Please? - Posted by Mindy-RN

Posted by howard-nyc on December 10, 2000 at 23:17:41:

You wrote, “Now the best part: you resell the home under an owner contract for a little over market value for, say, $145k.”

Can you define what you mean by “owner contract”?


Not Understanding ‘Subject To’ - Example Please? - Posted by Mindy-RN

Posted by Mindy-RN on December 10, 2000 at 20:19:54:

I’ve read many books on RE and I’ve only seen ‘subject to’ mentioned on this site and I’ll admit, I still don’t understand the fundamentals of it. It seems to me that ‘Subject To’ is one of the methods used to get around the due-on-sale clause. However, I’ve read on this site that the seller still keeps his name on the title in, so I’m wondering - is this just an “under the table” agreement whereby the buyer makes the mortgage payments to the seller who in turn pays the bank? For example, mortgage is $700 a month and is non-assumable so I just approach the seller and set up a side deal to pay him $700 a month so he can pay the loan. And then in the meantime, I rent it out to a tenant at $800? Is this correct? If not, can someone please give an example?

Re: Subject To - Posted by rudy

Posted by rudy on December 11, 2000 at 09:55:37:

Get the “Realty Blue Book” from Dearborn publishers as your reference book.

Neither covert nor overt… - Posted by TRandle

Posted by TRandle on December 11, 2000 at 07:28:03:

Taking title subject to the existing financing is not done under the table. However, it’s not necessarily volunteered to the lender, either.

I’m not positive, but I assume the HUD-1 settlement statement is universal throughout the states. Number 203 (at least here in Texas) on the front page has a spot for properties purchased subject to the existing financing. This information comes in handy when various realtors, attorneys, title reps, etc. try to explain that it’s illegal, unethical, etc. Good investing…

Re: Not Understanding ‘Subject To’ - - Posted by Taylor

Posted by Taylor on December 10, 2000 at 23:58:44:

Hi Mindy,
For a better understanding of any of the techniques used or spoken about on this forum go to the archives and search using the key words on the subject you are looking for. In this case type in “subject to”. It will amaze you how much information is available…at your very finger-tips.

I am not in a position to offer advice as I’m new at this too…but I do know that I wouldn’t want the seller forwarding the payments, besides if he’s selling the property ‘subject to’ he presumably wants to be done with the property anyway. Thats only my opinion and its not based on actual experience, but on my understanding from reading the different posts on this site. Your best bet is to do what I’ve done…go to the archives read, read, read, did I mention that you need to read…Oh yeah read some more and then if you’re stumped come back and post.

You’ll find that a lot of the veterans on this site have more than answered the question you have posted.I’m just amazed and thankful that they make and take the time to come back and help people like you and me get a better understanding of CRE. Wishing you all the good you would wish for yourself.

Seller Released? - Posted by george d.

Posted by george d. on December 10, 2000 at 23:29:18:

Is original seller released from his mortgage obligation and will it no longer show up on his credit report as a liability? I’m thinking the trust must do these things or the seller might be left holding his or her ankles.

Re: Not Understanding ‘Subject To’ - - Posted by Russ Sims

Posted by Russ Sims on December 10, 2000 at 22:41:53:

Here’s a basic example: Seller has loan balance of 125k, payments of $1000 a month.The home is worth 135k so it’s hardly worth the seller’s efforts to hire a realtor and deal with closing costs…there’s just not enough equity. So you the investor buy his property “subject to” the existing loan. You simply step into the homeowner’s shoes with his lender, and begin making his payments. Title will be transfered to you via a Land Trust or Pact Trust™ (or at least it should be).The lender can’t enforce the due on sale clause if title is transfered into a Trust.You will have the owner assign all or part of his beneficial interest to you, effectively making you the owner or in the case of a Pact Trust ™ giving you ownership rights. You will designate a trustee and voila! you own a 125K home and you paid nothing down. Now the best part: you resell the home under an owner contract for a little over market value for, say, $145k. You collect $1250 a month giving you a $250 positive cash flow. You make your payment directly to the previous owner’s lender. You gross 20k in profit,and that’s not including the positive cash flow.
Hope this helps!