BiggerPockets

Hello all and thanks in advance for your help!!!

I have a possible deal that I am working on. I have never done a subject to deal and have a couple of questions because I may be interested in doing a form of a subject to on this deal.

I want to offer the seller cash upfront, and take over his payments. I am assuming that this is " subject to."

Then I will fix and try to resell. We would pay the payments until we sold the house. Once the house sold we would obviously pay off the lien in his name of the house. It would need to be paid off at closing obviously.

Can this happen? Are there any flaws to this? If this is possible what is needed? Any advice would be great.

I am obviously wanting to do it this way as to not have to go through and pay the extra finance charges on the deal if the seller is willing to do it this way.

If he wont accept this, or it's just not able to happen, I will obviously just offer an amount and finance it.

As an appraiser, I dont see many subject to's with finance companies. From my understanding it is hard to get them to go for subject to. I would make sure your finance company is completely aware of the situation and what you are wanting to do. Also make a list for the appraiser of all the things you are going to do. It is easier for them to " see the big picture" when they are doing the inspection. Good luck.

Which finance company do you mean? The one that holds the seller's note? Or, the one financing your end buyer?

As long as you're on title for a sufficient period, the lender for your end buyer shouldn't care about the subject-to aspect of the deal. If its a fix-and-flip, there's always a possibility you'll own it too short of a time to meet their seasoning criteria.

As far as the seller's lender, the subject-to deal does violate the due on sale clause. But, there would be no approval or appraiser involved in purchasing the property. Loans are no longer assumable, so the original lender isn't going to be involved. Could they call the loan due? Yes. Will they? At the moment, it seems unlikely. They have other fish to fry. If you want to be totally up front, send them a letter saying what you're up to. If they don't object, it must be OK (right?)

In the deal like Jason describes, he plans to sell the house fairly quickly. even if they call the loan, and start a foreclosure, he can fix and sell the house before it will all come to a head.

Jon

The mortgage is a lien on the property securing the note owned by the lender.

The deed is the title to the property.

Think of it this way. I can own a property, have a mortgage on the property and still sign a lease to rent the place to a tenant.

The transactions are not mutually exclusive. A property is a bundle of rights and you can separate the rights.

A warranty deed or similar document can be used to transfer title. The buyer is buying the property in its existing condition with the existing finance still in place.

The seller will have issues if they have an outstanding mortgage from the sale plus they want another. Some will have the income to have both.

In some ways they can show that you are paying on the existing mortgage though they can not claim it as income.

Subject-to is not the best for someone who really needs to cash out. For those who are more concerned about avoiding foreclosure they will settle for a subject-to deal vs. having a foreclosure on their record. Not as good to them as a cash out but...

Yep, that is a typical " subject to" , make sure you check the title