Is the seller liable in a subject to deal?

I have a motivated seller that has little equity in her home but I'm wondering what would be the best way to explain the type of deal I think would be best, a subject to existing financing. She doesn't want to be responsible for the payments which I would take care of, but it doesn't sound as appealing if she would still be responsible if I miss payments.

Any clarification is appreciated.

Edited: 06/26/2010 at 09:06AM

Jon Holdman

Real Estate Investor · Denver, Colorado

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Icon_minipost Jul 25 '09, 12:17 PM

If you don't make the payments, her credit gets the hit. She is responsible, if she doesn't want the foreclosure on her record.

But why would you do that? If you buy the house, put some money into it, then you have a vested interest in making the payments. Her credit gets messed up, you lose the house.

Edited: 06/26/2010 at 09:07AM

Jon Holdman, Flying Phoenix LLC

Scott M.

Real Estate Investor · Rochester Hills, Michigan

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Icon_minipost Jul 26 '09, 03:25 AM

There is trust needed on both sides of this transaction for sure.

This is where having sellers with the proper motiviation comes in handy - takes some of the "trust" issues off the table is they see no other way out (or if there really isn't any other way out).

But her fears are real - I wouldn't just discount them I would understand them and make sure she understands you get them - becasue it is 100% true if you walk from the deal (and she would have no control over this - she is placing all her trust in you - a stranger) then she is right back where she is now....

The "good" news for her if there is any is that either way - she loses her home now or you lose it for her later she is in the same spot - at least with you she has a chance.

But bottom line is she would be responsible if you or whomever you sold it to stops making payments - no way around that.

Edited: 06/26/2010 at 09:07AM

Andy J.

Real Estate Investor · Colorado Springs, Colorado

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Icon_minipost Jul 26 '09, 04:41 AM

You can try to explain to her that it's just like renting her house, except you guarantee a payment every month, and you are responsible for taxes, insurance, and any repairs necessary. She could rent the house out to a complete stranger and hope they take good care of it and pay rent, or you take it sub-to, a professional that does this for a living, can make the payments everytime and handle all the hassles. Present her with choices, you can't change her mind, only she can.

Edited: 06/26/2010 at 09:07AM

Bryan Hancock

Real Estate Investor · Austin, Texas

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Icon_minipost May 30 '10, 03:55 AM

It seems you have a trust issue that could possibly be from something you said when you presented to the seller. Tell them you do this for a living and that you have no reason NOT to make the payments.

Edited: 06/26/2010 at 01:00PM

Bryan Hancock, Bullseye Capital Real Property Opportunity Fund
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Bill Gulley

Real Estate Investor · Springfield, Missouri

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Icon_minipost May 30 '10, 04:38 AM

Originally posted by Mr_Cash

I have a motivated seller that has little equity in her home but I'm wondering what would be the best way to explain the type of deal I think would be best, a subject to existing financing. She doesn't want to be responsible for the payments which I would take care of, but it doesn't sound as appealing if she would still be responsible if I miss payments.

Any clarification is appreciated.

Hi, this has a scary twang to it. How many of these deals have you done? Is this your first? It's not appealing for her as others pointed out above. I read this as you having a lack of confidence, nothing personal, but you said "if I miss payments". Doing a sub 2 deal with an investor who munderstands the issues and has the ability to step back into the deal to cure any problem is one thing, doing these deals will Helen Homeowner is another. If you do a deal like this with an unsophisticated seller you need to KNOW that you are not going to default in making those payments. The lack of confidence may well be projected and be the basis for the lack of trust. Down the road, especially the way laws are changing, if you do a deal and fail and cause harm to Helen, you have alot more to lose than the house deal you did. That payment needs to be made before your own home loan!

What if there is a fire? Do you have any idea how quickly insurance companies payoff losses? 6 months usually, so that means your tenant/buyer is gone, the mortgage still needs to be paid and you'll likely have at least a couple of months of no income from the property (to you) but you'll still have an obligation to be paid. Granted, such matters can be isnured, but not out of a standard fire policy. Been there done that! So, you need to know you can cover the deal, hell or high water, before you put someone else at risk. If you are, go for it. Good luckl, Bill

Edited: 06/26/2010 at 01:00PM