Hi Fellow Investors,
I’m a newbie who has a general knowledge of wholesaling, but I have no idea what buying properties subject-to means. Would someone please explain it to me the best they can?
Thanks!
AUinvestor,
Try this article…
http://www.reiclub.com/articles/sub2-beginner-investing
John $Cash$ Locke
Subject to means getting the deed to a piece of property “subject-to” the current owner’s existing financing. Typically, you give the owner some “moving money” for the the equity the owner has established, you put the deed into a trust you control, and the trust starts making the same payments the previous owner was making.
Very interesting!
Thanks so much for the reply’s. I feel there is so much to learn with RE investing, but the possibilities are endless.
Remember on sub2 you need to disclosed to the seller that the lender can call the note due if the seller deed the property to you without the banks approval.
Why?
I’m thinking that Real Estate Seller might have that one backwards…
The Seller needs to disclose to me the investor that the lender can call the note due if the seller deeds the property. After all it is the seller’s contract with the seller’s lender, and it was the seller that made this agreement with the lender not me, therefore his disclosure.
I love that…!
It would be so hilarious (to me) to have a seller sign a document “warning me” that the bank could call his loan due.
Hey, are you the John LV from Cash’s world…?
The same.
With so many upside down mortgages, many of the owners who want to get out of their homes don’t have any equity.
What am I missing?
With so many upside down mortgages, many of the owners who want to get out of their homes don't have any equity. What am I missing?
Could someone pls respond to the question above?
What’s your actual question?
[u][b]Typically, you give the owner some "moving money" for the the equity the owner has established,[/b][/u] you put the deed into a trust you control, and the trust starts making the same payments the previous owner was making.
With so many upside down mortgages, many of the owners who want to get out of their homes don’t have any equity.
What am I missing?
[/quote]
I guess basically, my question is how can you give an owner “moving money” for equity when the reason why most owners want to get out of their current situation is because they are upside down on their mortgage which means they have no equity?
That’s a great question. The fact is just because you ‘can’ buy sub2, doesn’t mean you should.
The only reason I would buy an upside down sub2 deal is if there was hidden value in the deal. Hidden value could be an extremely low interest rate, or maybe extra high demand, or controlling a short sale negotiation. or perhaps a rehab job. Sub2 is used a LOT with flipping fixers.
As far as finding underwater deals and giving sellers money… With the government manipulating the market so heavily over the last four years, normal market forces don’t apply. Defaulted sellers aren’t being immediately forced out of their houses; they’ve discovered that banks and investors will offer them ‘cash for keys’, so they’ll insist on something of that nature like a spoiled 3-year old. Their credit’s already trashed, so it’s just a matter of waiting out the bank “fo sum munny.”
That’s why we don’t deal with defaults. Too many deals come to us with the seller months and months behind. And they’ll squat until the bank takes the property bank, or, again, gives them money. No thanks.
What’s that actually mean? It means that we don’t buy underwater houses. We want to focus on the sellers that need out, but want to protect their credit. It means that sellers trust us to take care of them after a sale, which of course means paying their loan on time (for the first time in a while in many cases).
There are ways to make money on defaulted houses using Sub2 financing, but that’s for another post.
There are ways to make money on defaulted houses using Sub2 financing, but that's for another post.
Can you share the link to the other post?
When financing a property, the note says I owe x amount of money and the Deed of Trust or Mortgage says, “here is how the lender proceeds to take over the collateral or sell it if I don’t pay the note as agreed upon.” Generally, the person borrowing the money is personally liable on the loan. This means that if the collateral that backs the note, once sold, is not enough to cover the debt, the borrower must make up the difference from their other resources.
Traditionally, if you don’t get a new loan when you buy a property, you will take over ownership and “assume and agree to pay the loan as was agreed upon.”
read more: http://www.foreclosureuniversity.com/studycenter/freereports/buying_real_estate_subject_to.php