One more 'subject to' question... - Posted by Valerie PA

Posted by Valerie PA on July 16, 2001 at 07:31:28:

Not sensitive… just suprised.

Thanks for your response.


One more ‘subject to’ question… - Posted by Valerie PA

Posted by Valerie PA on July 13, 2001 at 12:55:04:

How does the buyer get his equity out of the sale of the property under ‘subject to’?

Does it come at the back end when I sell the property and cash him out?? (2-3 years later if I L/O to my T/B)

If I flip the property, I could give it to him at closing HOWEVER I am looking more at doing an owner finance to my T/B.

Sorry, I’m sure this has been asked before but I’m having a problem searching the archives. It won’t download. Anyone who doesn’t mind repeating themselves, please respond. :wink:


One more ‘subject to’ question…MORE Than that - Posted by Alex Gurevich, TX

Posted by Alex Gurevich, TX on July 13, 2001 at 13:41:09:


I don’t want to come accross as rude, but it seems, the understanding of the subject-to and L/O transactions won’t fit in the “one more question” category for you.

There are many more questions you don’t know answers to. While you certainly should get all the free help from the board members you can, for your own protection, please do yourself a favor and get a course or two, or a very good book covering these areas (contracts, what to do when, you gets what and when, etc).

It really looks like your chances of screwing something up are high.

Re: One more ‘subject to’ question… - Posted by Matt_IL

Posted by Matt_IL on July 13, 2001 at 13:22:28:


There are many possibilities for this:

  1. The seller’s equity is low and/or they’re motivated enough that they’re willing to give it up in exchange for a fast sale. i.e. you’re buying the house for the remaining balance. Remember, if they were selling ‘conventionally’ they’d have to pay 6-7% Realtor commission, plus holding costs while the new buyer gets financed and waiting for closing day, plus closing costs (as much as 10%), plus on average the buyer would have negotiated the price down by 8%, etc. If someone owns a 100k house and has a mortgage of 95k and wants their equity, they’re in Fantasy Land. Let them sit and simmer a few more months. Time is on your side.

  2. If they have a lot of equity and you’re willing to give them some, you can give them something at closing. It could be cash, or a note (second mortgage or better yet an unsecured note), it could be promise (second mortgage?) to split some % of future appreciation, etc.

Does that help any?

  • Matt

Re: Your support is appreciated - Posted by Valerie

Posted by Valerie on July 13, 2001 at 20:17:08:

Thanks for the supportive response to my inquiry. I now know what course NOT to look into.


OUCH!! (nt) - Posted by arnie

Posted by arnie on July 13, 2001 at 14:35:43:


Re: One more ‘subject to’ question… - Posted by Valerie

Posted by Valerie on July 13, 2001 at 13:24:56:

Yep! Definitely more clear now! Can I use a standard purchase agreement with a subject to???

Suggestion - Posted by ScottS

Posted by ScottS on July 13, 2001 at 21:32:45:


I just spent a few bucks on Robert Kiyosaki’s latest product. In it he metions something I wish I would have considered before I started, or at least soon afterwards. The advice would most definitely have saved me a good sum of money.

He states, when trying to learn about any subject, wether it be real estate investing, stock market, lawn sales, basically anything you are considering being real serious at. You should consider having a mentor.

Now before you think I’m selling something allow me to finish, the purpose of the mentor is to tell you about your shortcomings and NOT be your friend. Too many people want a friend and not a mentor. He specifaclly states, if you are one who like to be augumentive or must be right then you need to look for a friend.

You, I guess in Alex’s opinion, have given the perception of not understanding the “subject to” transaction.

I don’t know your specific knowledge level but I would say he gave you some very good advice if what he percieves actually is the situation.

I’ll tell you, I have learned, this is NOT the business for the thin skinned person. Being the optimist I am, my suggestion would be to take the response for what it’s worth but look at your recent posts and consider how would someone come to the perception Alex arrived at.

We call it self assesment. He gave you his assessment, now to benefit from it you should do one on yourself. Doesn’t me he (or even I for that matter) is (am) right.

But since you’re asking for some pretty significant information for free why not get the most out of it.

Good Luck.


‘standard’ contract vs. ‘simple’. Thoughts? - Posted by Matt_IL

Posted by Matt_IL on July 13, 2001 at 14:25:01:

Not without modification. I got one of the ‘standard’ contracts for my county and it’s chock full of baloney about Realtors’ commissions, inspections, buyer obtaining financing, etc. Notice the only two options for you to buy with a ‘standard’ contract are ‘all cash’ and ‘obtain a new loan in your name.’

Disclaimer: The following is all theory and philosophy, and I have not actually done any subj-to’s, and I’m NOT a lawyer; this is not legal advice:

Now the question of “Should I use the ‘standard’ contract or something simpler, that favors a creative viewpoint?” I got Bronchick’s “Alt. RE Financing” course and it comes with a sale contract that is more basic and pro-creative. Which to use?

Thought #1: I like a simpler contract, because it spells out the essentials of the transaction without bogging down the seller. It may be easier to get a signature on it; i.e. better from a salesmanship point of view. Now it should still be complete in that includes all of the substantive terms of the agreement (price, terms, when to take possession, any contengiencies such as inspection, or title inspection, or finding a T/B, also what happens in the case of default, etc.). Now if you get a contract like this signed and someone insists that it be on a ‘standard’ form, I’d say, fine, and get a ‘standard’ contract, and modify to match what you’ve already agreed to. This means marking out and adding stuff until the singnificant pieces of information match what was in the first agreement. It seems to me like this would just be a ‘refinement’ of the existing agreement, but I’m not sure of the legalities of having two signed contracts. If you go this route, be VERY CAREFUL that the seller’s lawyer doesn’t let something slip in there, like the right to ‘seek specific performance’ (sue) in the case of default by you. Bottom line, though, is I would start with a ‘simpler’ contract if possible, even if it has to be transposed to a ‘standard’ contract later, for the salesmanship aspect. Once they’ve signed SOMETHING, it’s more of a done deal in their mind.

Thought #2: The more people that are involved (lawyers, realtors, etc…) the more certain it will be that someone insists it be on a ‘standard’ contract. I’ve also heard the argument that judges are more likely to rule in your favor if you have one.

Any lawyers out there? Check me on this one:

Thought #3: Someone might tell you (or the seller) that a non-‘standard’ contract ‘isnt legal’. Enter the fear mongers! To the seller that means ‘if you sign it, you go to jail’. They might tell you that all sales contracts are required to have certain clauses, inspections, etc. in them to be ‘legal’. What I believe this means is ‘enforceable.’ In other words, it isn’t ‘you go to jail if you sign this’ but ‘if you use the simpler form, you may not be successful in winning a specific performance lawsuit against the seller that would FORCE him to sell it to you, should he try to back out.’ Big difference! But let’s think about this for a minute. What do you think the chances are of the big, bad, filthy-rich, greedy, kicking-little-old-ladies-out-of-their-houses Investor winning a specific performance case against ANY sad, poor, innocent, taken-advantage-of-by-the-world, all-i-have-is-a-little-home-for-my-little-family seller? I suspect close to zero, no matter WHAT sales contract you lose. Plus, if I was at the point where I was contemplating suing the seller, it’s too much hassle. Move on to the next house. Yes it’s a fully binding, legal agreement but a judge will most likely let them weasel out of it, so you might as well let it go and save yourself a headache.

After all that, It would be my preference to use the contract that got the seller to the closing table as quickly and with as little resistance as possible.


Re: Suggestion - Posted by Valerie PA

Posted by Valerie PA on July 16, 2001 at 07:19:14:

I feel that since Alex took the time to give his opinion, he also should have taken the time to answer my question. I am not thin-skinned, nor am I the kind of person that doesn’t understand the power of education HOWEVER I come to this board for help and if someone wants to help me, I think that’s great. If they don’t and they must start out a sentence (whether spoken or written) with “I don’t mean to be rude BUT” then they probably should not say or write that sentence. I just feel that the message was a little harsh as Alex is neither my friend nor my mentor.

I will continue to visit this board and hope that the experienced investors who want to help will continue to give me the support they have been giving so pleasantly.

Thanks for your reply and for your opinion.


Re: ‘standard’ contract vs. ‘simple’. Thoughts? - Posted by Valerie PA

Posted by Valerie PA on July 13, 2001 at 20:30:19:

Matt -

I love listening to the creative ways people use to express their opinions and experience. Your reply was funny and enlightening. I have some contracts that I feel are very good from some of the courses I have studied (not CS) but none are written specifically for buying ‘subject to’. I think I need to really sit down and read them line by line (I already have many times for other buying options) to see how they could be modified for a ‘subject to’ purchase.

Thanks so much for your reply.

Valerie PA

Re: Suggestion - Posted by Alex Gurevich, TX

Posted by Alex Gurevich, TX on July 16, 2001 at 11:56:54:


First of all, I apologize that my response came accross in a harsh way. I shouldn’t have replied until I had more time to elaborate on it.

I scanned several of your preceding posts with questions about buying on subject-to and selling on lease/option. It appears you are trying to fill the gap between knowing very little about putting together a deal to actually making a successful transaction happen. You are trying to do this by asking questions on the board.

You are looking at two separate distinct transactions - buying on “subject-to” and selling on L/O. Each has its own set of contracts, disclosure forms, rules of the game, etc. In fact, there are hundreds of questions you don’t even know to ask yet because you haven’t studied the basics.

I don’t believe you can replace learning the fundamentals of real estate by getting some of your questions answered here. I bet the people who answered your questions would tell you just that. Their answers are not meant to cover the subject in its entirety, like seminars or courses attempt to. Most of the folks who answered you had gone through some seminars, bought investment courses, went to conventions, etc., and, of course, had plenty of real life experiences.

Once you get your fundamentals down, you can then fill the gaps still left by getting your questions answered here.

My further point was that with the limited information you collected so far in the ad-hoc manner, you were likely to be dangerous to yourself, first and foremost, but also to the people you will try to transact business with.

Last comment. You stated you now “knew which course not to buy”. I presume it was a shot at mine. First, I presently don’t have a course covering “subject-to” - the area you were gathering the facts about. Second, if you don’t buy a course from me my life won’t change. Later today I am picking up another $40,000 check at the title company, one of many checks like that which are coming my way. Third, you didn’t say which course you WERE going to buy. That proves the main point of my prior message, you seem to be unwilling to make a few hundred bucks investment in your success. That’s sad.

changes to include in a standard contract - Posted by Anne_ND

Posted by Anne_ND on July 14, 2001 at 11:12:13:


Would you rather learn to drive a speedboat from a professional speedboat racer or from someone who’d read a few books about it? This is the same thing. Matt IL admitted that he’s never done a sub-2 deal, whereas Alex has written a whole course on the topic. Your question reveals a great deal of naivete on the subject of buying real estate- buying subject to has many potential legal pitfalls, if you decide not to buy a course that addresses this way of buying, then at least find a lawyer AHEAD of time who is willing to work with you on these deals. Because after the crap-ola hits the fan, you’re not going to find someone that easily.

My advice:

  1. Buy Alternative RE Financing and anything else you can find by Bronchick.

  2. here are four changes I always put in my contract when buying through a Realtor (and therefore using their contract):

-add ‘and/or assigns’ after your name (or preferably, your company name) when first listed as BUYER

-somewhere add the words ‘liquidated damages limited to earnest money deposit’ We never put down more than $100 earnest money.

-the inspection clause should state that the inspection must be to the BUYERS SOLE SATISFACTION. The seller doesn’t get to say ‘hey this isn’t that bad, you have to buy the house anyway’. Our local contract says BUYERS AND SELLERS SATISFACTION.

-there was a post by Mike Oldfield at least 2 years ago about crossing out a phrase that credits the seller for taxes already paid during the current year. If you can find that phrase, and cross it out, you can reduce the amount of money you need to bring to closing (he claims by as much as $1K). This phrase will vary from contract to contract.

I strongly suggest that if you’re buying through Realtors to use their contract. So get to know the local RE Board of Realtors contract inside and out so that you know how to modify it. When buying from FSBOs we use Bronchick’s contract that’s been modified by our attorney.

good luck,


One final thing. When we were getting started a few years ago, my partner posted a very stupid question. Joe Kaiser’s response was humiliating and even crass. However, he was right, and we needed to hear what he was saying. We are now big fans of his. One of his courses enabled us to buy a house at pennies on the dollar. So I know maybe you’re feeling a little sensitive, but the choice is yours: wallow in righteous indignation or make LOTS OF MONEY. I hope you choose the latter.

Re: ‘standard’ contract vs. ‘simple’. Thoughts? - Posted by Watch Out

Posted by Watch Out on July 14, 2001 at 05:26:27:

Or, instead of reinventing the wheel, you could buy one of those nifty courses that already include the contracts, the explanation, legal and otherwise, sometimes even laid out on software for you ready to go.

You see, I agree with Alex and Scott. No one is trying to be rude to you. But … there are bunches of ways you could screw up and/or get hurt doing it wrong - or by omitting something you need to include.

I know of one character who likes to brag he never bought a course before doing his first subject-to, he just asked alot of questions here. But he also had a good buddy who took him under his wing and showed him how to do the contract, and told him what to watch out for.

The most popular subject-to courses are by William Bronchick, “Alternative Financing”; and France and Meister, “ABC’s of Subject-To” just in case you were wondering.