Sub2 as primary residence


I recently learned about the “Subject to existing financing” option to buy a home with bad credit, and I find it quite interesting. I am personally interested in buying a property as a primary residence and I was wondering how hard it would be for me to find/convince a motivated seller.

I currently have access to which allows me to see many distress properties in the San Francisco East Bay area. As most of you probably know, many of these properties are in the negative and the only way they can be sold in many cases is if the banks approve a short-sale.

My questions /doubts are the following:

  1. Considering that I am not in with the intention of simply make money, would it be worth it or recommended to buy a house that is in an upside down situation? Let’s say that house X is valued $550K, but, the owner has a loan for $600K, hoping that the house prices will gradually go back up in the next 5 to 7 years, would this be worth it? Ideally, I like to find a house that has some equity for obvious reasons, but if a desirable house and seller comes available, would you consider it?

  2. What would be the best way to get help in determining the terms, i.e., would it be advisable to offer the seller some of the equity (if any) upon sale or refinance, or is this just up to the buyer and seller to decide?

Thanks for your time!


If you found someone with a house worth $550,000 and they owed $600,000 it would be easy as candy getting someone to sign over their house “subject to”. This is because all the Realtors, mortgage brokers, and investors all said “no” to buying their house. If someone did this I wouldn’t make any promises down the road to give them any money. In some cases you can negotiate the debt to create equity if the seller is behind on payments and the banks are ready to foreclose. If I were you I would do some marketing and look a little harder and you’ll easily find a house with equity. If you find a house with equity the sellers are a little bit more resistant and may want some of their equity before they sign over their house to you. Good luck in your search.


Good to meet you.

As for Sub 2 in California that you want to use as your residence… Most definitely… There are tricks to be aware of… But a great way to own real estate.

Especially with the new federal laws… OMG its a great time…

Good Luck


Aaron, Mike, thanks for your input.



CA has laws on the books concerning foreclosure investing. Become familiar with your state law on foreclosure consulting and make sure that whatever you plan to do does not violate any of those laws when you are approaching homeowners in foreclosure.

I believe the codes Dave is referencing are civil codes 1695 and 2945… Fairly simple to work within and not get in trouble.

Very interesting. Thanks for sharing this information. After reading cc section 1695-1695.17 I found the following which seems to apply to my particular situation:

“1695.1. The following definitions apply to this chapter:
(a) “Equity purchaser” means any person who acquires title to any
residence in foreclosure, except a person who acquires such title as
(1) For the purpose of using such property as a personal

Thanks again,


Youre correct…

Great time to buy ‘subject 2’ for your personal residence. If you believe the market will recover in your time frame to a value higher than the existing mortgage balance, it could be a good deal. One thing though…if you are taking the seller out of a bad situation, I would make a requirement of them writing you a check for part of their ‘negative equity’ for you to take them out of their bad position. With an end in sight, the seller will be likely to write you a check…if not, I would find a similar deal where the seller would write you a check, as this is a flooded market of homes for sale with negative equity!

When I mentor an investor, I teach them to live by ‘unreasonable requests.’ Try it and see what happens! It has worked for me for 20 years and 400+ deals.