" Subject to" Properties 11 posts by 8 users

Posted: 03/31/2008 at 06:58PM

Good question. I am also interested in learning more about subject to's! Hope some good conversation happens here!

Posted: 04/01/2008 at 03:52PM

I have about five different letters going out to abandoned properties which in turn I will have contingencies that will " be subject to" . This is help me obtain the price that I want and not the price the owner is hoping for. If the owner see that I have him paying all the closing cost, me asking for credits due to this and that, subject to inspection, etc. Most likely they property itself has been siting there for some time and you have been the only person interested if they don't get a little more flexable they might loose you.

Posted: 04/03/2008 at 10:54PM

I'm confused. Are you talking about subject to where you buy a property from a seller, but leave the seller's loan in place? Or lease options where you lease a property to a tenant buyer with an option for the tenant buyer to eventually refi and exercise their option? I think you're really talking about lease options.

I'm not sure I'd ever want to sell a house subject to a note that was in my name.

I would agree that lease options are a good technique these days.

Posted: 04/04/2008 at 11:10AM

So, lets be a little careful with the terms here. There are " subject to" deals and " lease option" deals. They're similar, but not the same. Wendy Patton does a nice job of comparing the two and describing when to use one and when to use the other. And, it is entirely possible to combine the two on the same property.

In a " subject to" deal, the buyer does take title to the property. There is an actual sales transaction, and it should be closed with a title company or lawyer. The deed that's given by the seller to the buyer will be subject to the existing mortgage. The title insurance will also have an exception for the mortgage. The mortgage remains in place, and remains in the sellers name. The buyer makes the payments. If they buyer doesn't make the payments, the lender will come after the seller first, since as far as they know, the seller still owns the property.

In a " lease option" deal, the tenant buyer does not take title. The seller is not really a seller, but rather a lessor and optionor (??). The tenant buyer leases the property from the " seller" and, at the same time buy in a separate transation, buys an option from the seller. There is an option consideration given from the tenant buyer (i.e., the option buyer) to the option seller. This gives the tenant buyer the right to purchase the property at a specified or to be determined price at some point in the future. It does not give the buyer title. The buyer makes lease payments to the seller. The seller continue to pay their own mortgage, if they have one. If the tenant buyer doesn't make the lease payments, they are evicted.

Similar approaches, but not the same because of who has title and who's making payments to whom. Paperwork is going to be very different.

Posted: 04/04/2008 at 02:31PM

Yes it is pretty much a lease option, I quess some investors have diffrent guide lines but if you have a motivated seller that needs to move for some reason and can not sell the home, you take over the payments on the existing mortgage. The tenant that you have in line moves in and pays the mortgage at the price you set. The tenant would pay and option fee and first months rent to move in. They would pay the rent for a year that will go towards the down payment of the purchase. In that year the tenant would try to get themselves together to buy the home. If they do buy the home you would get a good cut from the purchase.

Thats a sandwich lease, if you arent taking the deed. You lease from the seller, then lease to a tenant/buyer. You are in a great state for transfer taxes, too. You pay ZERO.

If you take the deed, its considered taken subject-to the existing mortgage, then you lease option on the sell side. They are two different things, with different paperwork, just as wheatie said.

For those of you who actively investing in Sub 2 deals, what do you recommend as the best material on the subject. I know Wendy Patton has some materials, but I would like to hear your personal referrals.

I hear William Tingle offers a good sub2 program. Email him, if you have questions. He answers all of them personally. Ive mailed him several times.