I’m trying to wrap my head around why any party would want to do a sub2. If a seller is in distress in a down market and I come to the table offering a sub2 then I’m essentially buying a property that is worth much less than the amount owed to the mortgage company.
If we are in an up market then why wouldn’t the owner just outright sell the property to profit themselves? I’m thinking in terms of the current market. I’m Arizona it seems that every home is either a short sale or and REO.
I think you’re looking at the wrong senario here. Lets say the seller has some equity, the seller has bought another home. Seller has been trying to sell for a couple of years with no success. Home needs some repairs and seller can’t afford it. Seller can not make two payments any longer. Seller is in denial. You come by and he says he just wants out, take it. You fix it and resell for a nice profit. Just one senario. Herbster
Maybe seller has it listed for much more than it’s worth? Maybe he’s slowly lowering the price but not fast enough to keep up with the devaluing of the market? He gets no offers and now just wants to get rid of it? Am I on the right track? I step in relieve him and get it sold and he is happy?
Yep, you’re on the right track. You step in and assume the financing. Make sure there is enough equity in it for you. You are also responcible to make the payments until you find a buyer. Search and read all you can here. Have you taken a course? There is a lot more to this than whats been said so far. Maybe $Cash$ will jump in, he’s our resident Sub2 expert. Herbster
I just joined AZREIA (Arizona REI club). I’m registering for all of the courses that I can when thye become available.
There are very few cases where a Subject-to would make sense if the mortgage balance is higher than the property value. Maybe if the payments were super low and the cash flow is good. Maybe, but unlikely.
There are numerous reasons people would sell subject-to in an up market. Convenience, speed, etc…
In today’s market, subject-to’s are getting increasingly scarce because of the plummeting property values. Real Estate is cyclical (obviously). There will be a time when Subject-to’s will be mainstream again.
So right now is REO (although this is almost over) and Short Sales or Regular sales and FSBO are the way to go.
In today’s market of dried up capital and values in the toilet SS are going to be the easiest to find however they may be the hardest to make high returns on…
Free and Clears are still out there… about 9% of the market… Learn the in and out of seller financing… Learn subordination agreements and transfer of collateral… Knowing this will make you a bucket load…
Once you understand Sub 2 investing you’ll learn how to make money off a house without buying equity… naturally that depends on your investment strategy…
Good Luck
A subject-to is a great strategy. Many sellers love the idea, as they
are motivated sellers. If you’re not dealing with motivated sellers,
you won’t get any sub-2 deals. They have to have an underlying problem,
and the problem doesn’t have to be with the property itself, it could
be a divorce, possibly bankruptcy, loss of job, etc., and disposing of
the property by any means makes more sense to them.
Maybe they can’t afford to sit on the house for 6 months or more
waiting for a realtor to sell it. With a sub-2 we can get it done FAST,
within 24 hours, or within just a few weeks.
Even if a house is upside down, you can make a sub-2 work by selling
your negotiated deal to an owner occupant, of course, with full disclosure.
Sub-2 however, is a more complicated transaction, and you must be
aware of the risks, the pros and the cons.
GET EDUCATED, first, before EVER attempting a subject-2 transaction.