Legalities of sub2 in N.C.

Are there any investors out there that work in North Carolina? I’ve heard a lot of talk about how sub2’s and land trusts aren’t allowed in N.C. because of a fraud issue or something like that. It’s like the people seem to think that others just deed their property to avoid taxes or debts or something. We are new investors wanting to find out the legalities of sub2’s and land trusts so that we don’t have to stand in front of the attorney general and explain ourselves. If anyone has any advise, please do be so kind as to give us some information on this subject.


Hey William

My name is Troy Williams, RE investor in Hope Mills, NC. Have you taken a look at this website

This site is keeping all us investors up to date on what the state is doing.

As far as legalities, I doing the sub2 and Land Trust just like all the folks teach. Alot of the bill doesn’t make sense and there is some loopholes.

I’m still doing business until I hear something different. I’m not scamming people, just trying to help.



Troy, not all the folks teach use a Land Trust and I will tell you if you are using one in North Carolina and a problem arises that the Attorney Generals office is aware of you will be standing tall in front of one of the the of folks there explaining why you use one, in North Carolina they call it Fraud.

How do I know, I have had several conversations with the powers that be in North Carolina and this is there stand on Land Trusts it is Fraud in their eyes It was using Land Trusts in part that prompted this new legislation.

Secondly if you think there are loopholes in the new bill if it is passed as written, then prepare for some serious problems with the law unless you are prepared to post a $250,000 dollar bond and conform to the law as passed. Be aware they will be looking to find an investor to prove their point, so make sure it is not you.

John $Cash$ Locke

PS: The bill was re-drafted and it is tighter on shutting down investors.


You can currently do Subject To deals in North Carolina, just did one myself and did not use a Land Trust as I did not want to explain to the Attorney Generals office why I committed fraud.

The new bill if passed will in essence stop almost all forms of creative investing where the loan contains a Due On Sale clause and you are trying to get the deed, not allowed should it pass.

Will I personally continue to do deals in North Carolina, certainly only legally as they do have a provision for licensee’s within state guidelines to still stay creative.

John $Cash$ Locke


This bill is an overkill, it basically looks like some folks were upset about us doing business. After talking to a couple of attorneys their is some loopholes in this document.

We are all after the same thing to kill the bill. But freedom of choice is at stake and ALOT of folks ould be affected, not just investors.

Yes, becoming a realtor would solve that problem or just doing one deal a year would make you exempt. But come on now, why would you just let someone do one deal a year instead of just no letting them do any at all.

That doesn’t make any sense to me


Alright gentlemen,
So if this bill is passed, we might as well move to another state to be able to do RE investing freely. We have spent so much money on books, tapes, seminars etc. and now it is becoming impossible to do Re investing in N.C., assuming this bill is passed. Great!! Perfect!!
I guess it’s time to move out of this state…
Any body know of a good state to pick from? One that allows people to be able to do RE investing more freely? I can’t believe that N.C. doesn’t want people to get wealthy. Just another brick wall in the eyes of a newbie.
At least the bill hasn’t passed yet. I bet other investors are trying to buy and sell like crazy just in case this bill does come into affect. Would anyone like a partner who is currently in another state?
Thanks for the information guys.

This bill is an overkill, it basically looks like some folks were upset about us doing business.

Well, sort of. Yes, this bill is an overkill. Why it came about is because a few “investors” (using that term lightly here) decided it would be a good idea to increase their profits by NOT paying the mortgage on their Sub2 deals. Of course, that meant that they eventually got foreclosed, but it was the sellers that got the worst of the deal, not the crooked investors.
Charlotte in particular has had a great number of these type of “investors” in it’s area. Complaints got the NC AG interested in the problem and voila, you have Bill 725 in the works. So, no, it was NOT because someone was upset because “we” (again a looseknit term) were doing business, but rather HOW “we” were doing business.

b]After talking to a couple of attorneys their is some loopholes in this document.[/b]
Well, I agree with Cash here. The 2nd draft is tighter than the 1st. If you see loopholes, I’m curious as to what exactly they are. Primarily, this bill deals with Sub2 transactions, but it will affect ALL investors. Investors that L/O their properties will no longer be allowed to have a nonrefundable option fee under the terms of this bill. If that is the case, then what is the benefit of the investor to offer a L/O at all? Especially following the guidelines of this bill.

Whether it makes sense to you or not, Troy, the sad fact is, if this bill passes, then the world of RE investing in NC will change. You will either have to change with it, or have tons of $$$ and attorneys available to fight the NC AG.

No, William, even if the bill passes, it does not mean that you have to move to another state to invest in RE (though that’ll mean more deals for me). It simply means that there is another law that you have to follow, especially if you focus is on Sub2 deals.

The sad truth is that all the laws necessary to stop scammers is already on the books, if they will just enforce them. As with these current laws, the scammers will find a way to still scam people.


Thanks for your insight, Roger. It is a shame that there are crooked investors ruining the name of RE investing for the ones who actually want to help people as well as become wealthy themselves. Just like in everything else, I guess. There are always bad apples.

“Investors that L/O their properties will no longer be allowed to have a nonrefundable option fee under the terms of this bill.”

So does this mean that they don’t make the option fee or that if they decide not to buy the property that they get to keep the option fee? I assume it would be the second one. Either way, the only benefit to the investor would be the appreciation of the property…at the cash out. When the investor gets his asking price, which is more than what the original seller received, plus the monthly payment if it is more than what is paid to the original seller. All in all that still isn’t really worth going after, unless the appreciation is rather high and the asking price is much higher than what the original seller gets. But that’s sort of like the “long haul”. You might as well be doing rental property. Am I wrong? Please tell me if I am, love the information!


Here is what the bill says about L/O:
‘It is against North Carolina law for a real estate resale dealer to charge a consumer a nonrefundable deposit, payment, fee, or similar consideration on a rent‑to‑own agreement, an option to buy contract, a contract or offer to purchase, a lease option or lease purchase agreement, an installment land sale contract with right of possession in the buyer, a land trust agreement, or some similar arrangement if the real estate resale dealer has taken control of the property while the property is subject to a deed of trust or mortgage or mortgage securing the debt of another person.’

Now, as I read it, you, as the investor, cannot collect a ‘nonrefundable’ fee or deposit IF there is a lien against the property that is in the name of a person other than the investor or the investor’s business. HOWEVER, you’ll notice that it is very vague. Depending on who is reading it will really determine what exactly is “another person.” IF you are the tenant/buyer, another person is the investor. Confusing isn’t it?

It’s really hard to say how best to handle L/O’s and the like at this point. Let’s wait and see when and if, this bill becomes law, and if it does, exactly what is included in the law. I’m sure that it WILL become a law, but I’m also sure that it will undergo at least a couple more revisions before passing.