subject to closings - Posted by ed

Posted by eric-fl on May 12, 2004 at 16:36:24:

Ed, I’m not trying to be adversarial, but Gerald is absolutely correct. No one will put down 20k on this house; you’ll be fortunate to get 5, and yes, investors “put them in” for that all the time. Think about it - why would someone, who has 20k to put down on a 150k house, finance through you? Why not just go to the bank and get 6%? Most people who owner finance either have no cash, no credit, or neither. That’s WHY they owner-finance. People who don’t need that, don’t need it. To put it another way, the car dealer always offers me financing; I never take it. I know I can always get a better financing deal from my credit union. Not everyone can. So they pay more for the financing. Same with houses.

In direct answer to your question, you might want to look for some Real Estate investment clubs in your area. Investor-friendly title companies usually advertise at these. There is a line for “subject-to” right on the back of the HUD-1 settlement form that all the title companies use. If they are telling you no, it’s probably just because they don’t understand the concept.

subject to closings - Posted by ed

Posted by ed on May 12, 2004 at 11:43:00:

Sure could use some help here. Just started and have a house I can buy subject to. Good condition. Appraised at 150k
seller wants 18k. Mortgage balance is 92k. Making price to me 110k. I want to buy it subject to and put a buyer in at 150k with 20k down and finance 130k leaving 92k in place. I am in Birmingham Alabama and cannot find a title company or attorney that will close when the subject to comes up. Any suggestions other than moving out of Birmingham???
Any Alabama investors have a way to close subject to’s ? Thanks.

Re: subject to closings - Posted by B.L.Renfrow

Posted by B.L.Renfrow on May 12, 2004 at 16:36:27:

What Gerald is saying is that if you’re counting on finding a buyer walking around with $20k cash to put down on this deal, you may be in for a very long wait. Most people with $20k cash on hand will simply go to a bank and get a conventional loan; they’re not going to be calling on your owner-financed property. Sure, it MIGHT happen…eventually…but you’d better be prepared to hold for a long time unless you already have a buyer with that kind of cash lined up.

I assume you’re planning to use this downpayment to give your seller the $18k he wants? If so, where’s your front-end profit? Surely you’ve heard the admonitions to make your profit going into the deal? If you feel your deal supports giving him $18k, I’d be looking to do it when I sold or refinanced the property, not up front. Find out what he really NEEDS as opposed to WANTS, then find out how to meet his needs. You might be pleasantly surprised if you find out his needs don’t cost anywhere near $18k up front.

Next, how sure are you of the property’s FMV? Have you checked comps? You refer to an appraisal, but that’s as good as wet toilet paper. I can get an appraisal to say just about anything I want. Especially if it was for a refinance or second mortgage, I’d put very little stock in that and instead base my assessment of value on recent sold comps.

As for being unable to find a title company or attorney to handle the closing, what are they telling you? Most likely, they don’t understand what you’re trying to do. If you are able to find out exactly what their concerns are, then address them, that’t the way to go.

Is there a local investor’s group? There must be, in a city the size of Birmingham. The experienced investors there should be able to give you some referrals to investor-friendly attorneys and/or title companies.

I find it difficult to believe that if you approach an attorney and ask if you can hire him to review some documents and prepare a deed that he would refuse. That’s really all it amounts to. You’re simply hiring him to do a specific job, not to advise you on the whole concept of subject-to.

As for do it yourself closings, sure it can be done, but not without risk. If you take this approach, you need to understand EVERY word on EVERY document. And keep in mind that seemingly simple words may have very precise legal meanings. At a minimum I’d suggest having an attorney review your documents for validity in your state. I would also strongly suggest having the deed prepared by the attorney (or title company, whichever is the norm for your area).

When I first started out, I used documents from a very reputable source (Bronchick). I had my attorney review them, and he noted that the wording on the notary acknowledgement was not valid in my state. At first glance, I didn’t see the difference…only a few words, and the order in which they appeared. But if not corrected, it could have prevented me from recording some very important documents. Since each state (and sometimes counties) have specific and unique requirements, when you first start out it’s only good business sense to have the documents reviewed if you are getting them from a course.

Brian (NY)

Re: subject to closings - Posted by gerald(tx)

Posted by gerald(tx) on May 12, 2004 at 14:47:23:

Closing Sub2 are simple (if you know what you are doing). Do all of mine myself. As a newbie, you need to buy a course on Sub2, get the forms, understand the whole process. You’ll probably want to use a land trust, although it is not necessary. A good course can give you all this. The Sub2 process is simple, but you can jump into a legal nightmare if you make a few mistakes for lack of knowledge.

Right now, it sounds like you are fresh from Seminar La La Dreamland. Think you are going to get 20% down on an owner finance? Dream on. It’s possible, but only once in lots of years and dozens of properties, has it happened to me. $5k down is probably realistic.

Spend a little on education first, then you’ll be ready to leap.

Re: subject to closings - Posted by ed

Posted by ed on May 12, 2004 at 15:20:23:

Are you saying that you would put someone in a150000 house with 5000 down payment. Now that is nuts.
And yes I have the course thank you.