'Subject to' question - Posted by Tim (CT)

Posted by RJ on July 20, 2001 at 08:50:00:

Thanks for the doc.

‘Subject to’ question - Posted by Tim (CT)

Posted by Tim (CT) on July 19, 2001 at 11:08:33:

I think I’m starting to understand the advantages to the buyer when purchasing a property ‘subject to’, but what about the seller? What’s the advantage of selling a property to somebody that wants to purchase it with the ‘subject to’ technique? Is it correct in saying that the seller in a ‘subject to’ transaction is still responsible for the loan but doesn’t necessarily have to worry about finding a tenant for the property to get the rent to pay for the loan? So, what’s the advantage?


Re: ‘Subject to’ question - Posted by JohnBoy

Posted by JohnBoy on July 19, 2001 at 11:31:51:

You save them from losing the property to foreclosure. You save their credit. You maintain a good credit rating for them since the loan remains in their name and keeps getting reported on their credit file. You get them out from under having to pay the mortgage payments. If they have little to no equity you save them from having to come out of pocket THOUSANDS of dollars they would have to come to closing with to cover paying a realtor’s commission and any closing costs. You get their property SOLD for them NOW, instead of waiting up to 6 months or longer while they have to continue to worry about the mortgage payments! There loan will eventually get paid off without having to mess with doing a short sale with the lender just to get rid of it. They won’t have to worry about getting a deficiency judgement if the lender had to foreclose and take a loss on the loan. It could save them from possibly having to end up filing a BK. These are some of things that are to the seller’s advantage!

Remember though, this isn’t the way the typical seller will agree to in order to get their property sold. The seller will need to be MOTIVATED to get out from under the property for one reason or another. What ever reason that may be, it’s to their advantage to sell to you subject to in order to solve their problem!

Re: ‘Subject to’ question - Posted by RJ(GA)

Posted by RJ(GA) on July 19, 2001 at 15:50:13:

I’m waiting on the Creative Financing set in the mail. But I’ve already purchased a preforeclosure subject to. The payoff is 83k. I reinstated the loan for 7.5k. The orig. loan was for 91.5k. The appraisal came back at 139k. Home is in good condition. Just needs some yard work for overgrown ivy. Title is clean. I have a Warranty deed, POA to handle anything related to the property and the loan, the CYA letter, Month to Month lease and check for next month’s rent. That’s all I could think of that I could do on my own and look like I knew what I was doing to secure the deal. I’m giving her til the end of Aug. to move. I already have 2 prospective L/O tenants.

However, I have a feeling that the deal is still undone.

When I ordered the appraisal & title search, I was asked for the HUD 1 and a copy of the purchase agreement. I don’t have either one. Are these necessary to have when taking over subject to? I’m pretty sure the HUD 1 is for when getting a new loan. So I don’t really need that. But, where can I get a purchase agreement asap for a subject to purchase? and what would I put as the purchase price? 90.5k with 7.5k down or what? Is there anything else that I’m missing?

Re: ‘Subject to’ question - Posted by JohnBoy

Posted by JohnBoy on July 19, 2001 at 17:31:34:

I sent you an attachment but it came back as address not found.

Re: ‘Subject to’ question - Posted by JohnBoy

Posted by JohnBoy on July 19, 2001 at 17:22:01:

You need to write up a purchase agreement. Also make sure you have the docs notarized. Once you have the deed and it’s been notarized, it’s a done deal. YOU own the property. All that’s left is to record the deed.

The purchase price would be the total amount you are paying for the property, which in this case I’m assuming will be what ever the loan balance is and the amount you needed to reinstate the loan. So yes, $90.5k would be your purchase price.

I sent you a purchase contract you can use.

Sorry. Here it is. - Posted by RJ(GA)

Posted by RJ(GA) on July 19, 2001 at 20:49:45:

typing too fast.

Re: ‘Subject to’ question - Posted by Connie SoCA

Posted by Connie SoCA on July 19, 2001 at 17:35:34:

Do Subject to deals work in CA? I can see a lot of pre-foreclosure candidates if this would work. However, this Title question will probably come up.

I assume also that the lender will know that something is up since the house was brought current in a lump sum.
Is the goal to sell quickly to a third party, at a discount, to get this property off your plate and YOU profit on the spread? Would a lease-option to another buyer only extend the time the lender has to find out and invoke the DOS clause?

Since the intent is to eventually sell the property, will the lender really care, since they probably don’t want the property to go into foreclosure in the first place. Right? (yes, no?)

Re: ‘Subject to’ question - Posted by JohnBoy

Posted by JohnBoy on July 19, 2001 at 22:04:24:

Yes, they work in CA. However, I understand there are some tougher laws in CA pertaining to real estate, so make sure you seek out proper legal advise before venturing out on your own to make sure you properly protect yourself.

Just because the loan is brought current in a lump sum doesn’t mean the lender will think something is up, other than that the borrower must have gotten a loan from someone to catch them up to avoid losing their home. This wouldn’t be an uncommon thing where people fall behind on their payments and then come up with the money to catch up.

The goal is to L/O or sell on contract at a premium price and generate the best profit you can get from the deal. If it was a deal that required a chunk of cash to get and you were getting a ton of equity in the deal, then it might be something to consider selling at a bargain price to get your cash back and make a nice profit from deal putting a decent chunk of cash in your pocket!

If you set everything up properly then it would be unlikely that the lender would even find out about the property transfering ownership. This is where using land trust come into play. Transfer of ownership can be hidden through the use of a land trust, making it much more difficult for the lender to ever find out unless the buyer or seller was to just tell the lender about it themselves.

If the loan is current and the payments are being made on time then even if the lender did find out chances are slim that they would do anything about it. The only other time they might do anything about it is, if the loan was at a low interest rate and current rates are way up from that, they may call a loan just so they can reloan that money out at a higher rate. They would probably just try and get the new owner to just come down and sign a new mortgage so they can charge the higher rate.

Even in a worse case scenario, they would still have to foreclose and go through the foreclosure process to get the property back if they called the loan and you refused to pay it off! That would give you some time to either refinance it yourself to pay them off, or try and get your tenant/buyer financed to buy the property, or put it on the market and sell it out right to a qualified buyer before losing it to the lender foreclosing.

It would be pretty stupid of the lender to call the loan and actually proceed by enforcing it by foreclosing when the payments are being made on time every month. They only stand to hurt themselves in the end and risk losing money and/or getting back a property that ends up being trashed because of them foreclosing on it.

Re: ‘Subject to’ question - Posted by Connie SoCA

Posted by Connie SoCA on July 19, 2001 at 23:00:40:

In my mind, this would work with any FSBO if I could get my foot in the door. In reality, getting my foot in the door may be possible if I worked just with pre-foreclosures. I tend to think too big and maybe should work a smaller “farm” – I get notice of defaults from all of OC, including TD sales, but I think I should try one zip code!

Anyway, thanks for your response.

Re: ‘Subject to’ question - Posted by JohnBoy

Posted by JohnBoy on July 19, 2001 at 23:34:39:

Actually, in reality you get your foot in the door by working with sellers that are MOTIVATED! That does include those that are in pre-foreclosure, but there is a lot of other things that cause a seller to become MOTIVATED!

Foreclosure, loss of job, job transfer to another area, divorce, death, inheritance, tired landlord, multiple mortgage payments, homes that haven’t sold after sitting on the market long, etc, etc, etc.

The idea though is, not for you to have to run around looking for these sellers, but to get these sellers calling YOU instead! Market yourself by getting the word out and make it so these sellers can find YOU instead of you running around trying to find them!

Post bandit signs everywhere you can. Put flyers out everywhere you can. Hand business cards out to everyone you meet. Run ads in papers.

Let the world know that CONNIE BUYS HOUSES!!!

One thing to remember is that the typical home buyer or seller does not understand any type of creative real estate buying or selling. They typically use a realtor to buy or sell. When that realtor doesn’t sell that home or when that buyer can’t get that loan…that’s where motivation starts to set in. The seller starts getting motivated to sell and the buyer starts getting motivated to buy. In either case they both just want out or in. The seller will just let the property go to get their problem solved and the buyer will gladly pay any price to just get in if you can solve their problem.

Motivated sellers are those that have been trying to sell but haven’t been able to for one reason or another. Or they may be facing foreclosure, or they may be in a divorce situation, or they may have been transferred with their job and need to move on but they don’t want to leave the house empty or deal with renting it out to renters being so far away, or they may have lost their job and can no longer afford the home and need to find something less expensive, or they may have purchased another home and are now stuck with two mortgage payments, or for what ever other reasons they just need to get out from under their mortgage payments.

The buyers just need someone that will sell to them. They can’t get a bank loan or some just “think” they can’t get a bank loan and they only care about two things! How much down and how much per month? If they can afford the payments and have enough to put down in order to let them in, price doesn’t matter to them as much. They just WANT to be able to buy a home!

Your job is to become the “PROBLEM SOLVER!” Instead of thinking in terms of, I’m looking to buy properties, or I want to be an investor, or how do I buy properties with no money, or how do I get financing, etc…

Start thinking in terms of being a “problem solver”. Your job is to find SOLUTIONS to fix someone else’s problems! Your job is to sit down with these people and find out what their problem is. Once you figure out what their real problem is, you now know what they NEED! They all WANT an all cash sale. They WANT full price and WANT someone to just waltz in and buy their home the traditional way. But your job is to find out what they really NEED! Once you find out what their PROBLEM is, then you can determine what their NEED is. Once you know what they really NEED, then your job to get the deal closed is to just come up with the SOLUTION that will get them what they NEED!

You aren’t a real estate investor, you are a PROBLEM SOLVER! You find SOLUTIONS to solve anyone’s PROBLEM! That’s how you make the deals come together!

The best way to find the motivated sellers is to get them to find YOU! You get them to find you by getting the word out that you buy property! Any property, any condition, any price, any time! It doesn’t matter. Just present the property to you and you will figure out a solution to solve the sellers problem to get them what they NEED!

You get a bunch of business cards printed up. Put them out everywhere you go. Hand them out to everyone you meet. Get flyers made up. Post them everywhere you can. Put them in Laundromats, bowling alleys, advertising boards in supermarkets, car washes…put them any where you can put them! Then get some poster signs made up. Post them anywhere you can. Telephone poles. Nail them to a stake in post them on every intersection in town. Let the world know that CONNIE buys houses for CASH! Just give her a call!!!

Eventually people will start calling YOU! Most won’t be motivated, but some will! You want the ones that are motivated. When they call YOU, that’s when you screen them over the phone first and determine their motivation. Then you go visit them and get face to face with them and build a relationship with them. You want them to get comfortable talking to you. They may want to talk about their dog for all you care. Let them! Get comfortable with them. Let them build some trust in talking with you. When ever they talk, you SHUT UP and just LISTEN! Listen to everything they say. The more they talk, the more information they let out. The more info they let out, the more you learn about their PROBLEM. The more you learn about their problem, the more you will be able to find out what they really NEED! Once you got that information you can now figure out a SOLUTION that will SOLVE their PROBLEM by being able to give them what they NEED! Your solution to their problem gets them what they need and you make a profit for your problem solving skills! You’re a PROBLEM SOLVER! You’re the DOCTOR OF SOLUTIONS! DR. CONNIE, the master of problem solving!

Now, get busy and go out there and pick up two deals by the end of the month and then report back with your success story!