Subject To??? - Posted by Paul S. Strauss

Posted by Tim Fierro (WA) on October 08, 2001 at 15:15:03:

You are so correct. I guess if the owner did want out, they want out. If the current owner could carry 3 more payments, or even 2 more for this ‘vacant’ place, you might have some grace time to close everything before your own money is even in the picture.

I have never done a subject-to, so I don’t know the ins and outs of how they work.

Subject To??? - Posted by Paul S. Strauss

Posted by Paul S. Strauss on October 08, 2001 at 13:35:14:

I am pretty new to RE investing (3 Years, only 2 deals) and the only form of “no-money down” financing I have used is the Lease Option. Of course once I did the deals I felt like RE investing is easy- no sweat in a couple of years I’ll replace my income and live happily every after- which is of course my aim. I haven’t lost my drive, but I’m running up against a wall lately. A trusted partner in my second lease option has proposed buying a home ‘subject to’ and frankly I don’t understand it entirely. The home is WAY out of my league in my opinion (FMV of around $3.1 million) but my partner says that we can buy the home ‘subject to’ with seller financing. The idea would be to offer the seller $2 million cash ‘subject to’ and then re-sell to investors/builders for around $2.1 to $2.5 million on a quick cash sale within the next 90 days. How will this work? My partner is very excited about this and appearantly so is the seller who is a big-time “Don’t wanter” of this currently vacant property in a well established, affluent neighborhood. Any advice would be much appreciated.

Re: Subject To??? - Posted by Bob at Get the Deed

Posted by Bob at Get the Deed on October 08, 2001 at 17:42:19:

Wow…I hope that I can help you.

First, even though we recommend getting the deed to pretty homes and taking over payments ‘subject to’ the mortgage…there are limits. Here’s why.

Generally, we make money on the fact that we can offer seller financing. We found however, that this feature isn’t so important once you get beyond the price of a ‘family type home’.
Executive caliber homes are usually purchased by someone that can arrange for thier own financing.

I too, bought an executive home ‘subject to’ (it was my second deal). I struggled to get rid of it. Eventually, I listed it and sold it retail.

What I’d suggest you do is to offer to buy the home on an option. You negotiate the price up front, but have no financial commitment that may pull you under. If you can sell it, then the original owner must sell it to you under predefined conditions. If you can’t find a buyer then you walk.

Why would the owner agree to this? Well, he’s got nothing to lose. If you sell it he gains and if he sells it he gains. No harm, no foul.

Generally, I’d rather catch fish from the school, rather than wait for that big whale to come buy.

Or how about,

Pigs get fed; hogs get slaughtered.

In any case, I wouldn’t sign a document for a property where I may lose in the deal. There are too many easy deals out there.

Hope this helps,
Bob Meister

Re: Subject To??? - Posted by Alex Gurevich, TX

Posted by Alex Gurevich, TX on October 08, 2001 at 15:50:07:


I’m afraid this might be well over your head. I don’t see how a concept of subject-to would be beneficial in purchasing this property. Subject-to is taking over payments on existing loan. That’s probably the last thing in the world you need to do - become responsible for the payments on the (I assume) very high loan balance on this property.

In addition why would you want to get involved into something you don’t fully understand? This is quite clear from the way you describe it: “subject-to with owner financing” and “cash subject-to”.

If you want to play with the idea of trying to find a cash buyer for this property at a discounted price, why no just try (it may not be easy, btw) to get a 3-4 months option for all cash at the lowest price you can negotiate and then try to peddle it to someone else for a little more?

You know what an option is, since you’ve done a couple of L/Os. At least you already fully understand how to put this together.

Re: Subject To??? - Posted by Kristine-CA

Posted by Kristine-CA on October 08, 2001 at 14:06:25:

Paul: I’m new to subject-to as well, and am trying to understand what your partner is proposing. Is he proposing buying the home subject-to existing financing, which means your partnership would pay the mortgage (stays in seller’s name)until you sell and/or lease it to someone else? Or is he proposing some of kind of seller financing?

I’m sure the subject-to veterans will have some good ideas here.

Looking forward to learning more about your deal. Sincerely, Kristine

Re: Subject To??? - Posted by Tim Fierro (WA)

Posted by Tim Fierro (WA) on October 08, 2001 at 14:00:08:

If it has FMV of 3.1m and you can go subject2 for 2m, and you ‘know’ you can sell in 90 days for 2.5m; why not go subject2 with first payment due in 120 days?

Double check all your figures and the current housing in that area.

Re: Subject To??? - Posted by Kristine-CA

Posted by Kristine-CA on October 08, 2001 at 14:10:39:

Tim: why would the seller be attracted to a deal with first payment due in 120 days? If a seller “wants out”, isn’t 120 days a long time for him to continue to carry the loan, expenses, etc.?

Still trying to understand what makes these subject-to deals attractive…

Thanks. Sincerely, Kristine