How to Be Smart in a World of Dumb Real Estate Professionals

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I always encourage people if you are not informed about a topic; educate yourself about it…. There are too many resources available not to know a little information about a lot of topics.

Aristotle put it like this “The roots of education are bitter, but the fruit is sweet.”

There are many free resources to educate yourself about a topic you are unfamiliar with. Some great resources are found at your local Title Company, Real Estate Brokers, REIA, College or University, Bigger Pockets, CNBC and other media outlets.

Related: Getting Started in Real Estate With Less Than $1,000

I am not a subscriber of the often stated “jack of all trades” philosophy but again a little education and information can go a long way.

I have been listening to and watching a lot of investors work their craft at executing deals with subject 2 (wrap) financing and some are using this as their primary deal structure, and others are using it as an alternative offer if they can not secure the deal via traditional means. I bring this up because I have found that there are many real estate professionals that are still unfamiliar on subject 2 (wrap) financing, and when I say professionals I am referring to Realtors.

Hold On I Have to Lay the Foundation….

I recently attended a 3 hour workshop on subject 2 financing to brush up my skills on the deal structure. The class was  held by a well established title company, and as usual I was the only minority in the room, but that was not the shocker… I was the only Investor….that’s the shocker

The irony was that the room was filled with Realtors that were totally oblivious to subject 2 financing…..WOW!!! I was amazed, but at the same time I realized that Realtors are finally trying to learn other ways to structure deals in lieu of the traditional sales process. I applaud them for trying to learn, but I am dumb-founded that this strategy is not being used as an alternative resource.

One Realtor asked…Is subject 2 financing ILLEGAL?

Related: Is There a Problem with Buying Properties Subject-to Existing Financing?

As hard as it was for me not to laugh to be respectful of course… I sat comfortably in my seat to see how the Senior Escrow Officer address the question… quite well I must say, but that was to be expected she has been closing subject 2 deals for years.

Others asked…What are the benefits of this type of transaction for my clients, and how do I receive a commission for the deal?

Again, she was able to address all the questions tactfully, and provided handouts that would help them fill out the documents needed for a sales transaction.

Here are Some of the Homework Questions She Challenged Us to Identify and I Pass this Homework on to You….

What type of seller or buyer does this deal structure help most?

What are the benefits of subject 2 financing?

What kind of financing can not be structured as a sub2 deal?        Conventional          FHA                VA

Can you structure a sub2 with an ARM?

Why is the lender important when structuring this type of deal?

How often does a the lien holder execute the due on sale clause?      Often         Sometime          Hardly Ever

What is the difference between a Seller Carry and Subject 2?

If you can answer the majority of these questions you are well on your way to be able to structure a sub2 or wrap deal.

I wrote this article not to drive home the importance of sub 2 financing; but to inform all investors to take advantage of free workshops and educational classes.

Remember there are professionals that have been working in real estate that are either uneducated or misinformed about alternative deal structures, but are now utilizing these free classes to learn. Are You?

By the way how many of the above questions were you able to answer correctly, and how often are you using sub2 as a deal structure? I would love to know!!!

Be sure to leave your comments below!


About Author

Marcus Maloney

Marcus Maloney is a value investor and portfolio holder of residential and commercial units. He has completed over $3.3 million in wholesale transactions. Currently, Marcus is a licensed agent who wholesales virtually in multiple states while building his investment portfolio. He has also converted some of his deals into cash-flowing rentals. Marcus holds seven rentals, two of which are commercial units. He’s even purchased a school, which was converted into a daycare center. His overall goal is to turn what is a marginal profit into a significant equity position. He leverages the equity by using the BRRRR (buy, rehab, rent, refinance, repeat) strategy to increase his portfolio without any money out-of-pocket. Marcus has been featured in numerous podcast such as the Louisville Gal Podcast, The Best Deal Ever Podcast, The Flipping Junkie, and many others. He contributes content regularly to his YouTube channel and blog.


  1. Marcus,

    Great article and I too, many years ago, was astounded at the lack of knowledge of Realtors® regarding almost anything other than a slam dunk transaction.

    I teach Realtors® CE Credit Classes on “1031 Exchanging” and “How To use Your IRA To Buy Real Estate”.

    The first thing I drive into the minds of Realtors® is …

    In America today there are 45,000,000 IRAs collectively worth Six Trillion dollars and who do you think controls and has controlled those six trillion dollars over the decades? Wall Street enjoys a 95% dominance and control over the six trillion dollars.

    If we extrapolate, of the Realtors® who have an IRA, statistically 95% will have their hard earned dollars invested in …??? Yep, Wall Street products. Basically they trust someone else to invest for them and even pay that person a commission.

    Here’s a “News Flash” for most Realtors®; 200 Million dollars a month flee Wall Street’s “One-size-fits-all” IRAs into the waiting arms of Self-Directed IRA and Individual 401(k) Custodians and do you know what the #1 investment is for those 200 Million dollars monthly? Why it’s “real estate” the very product Realtors® sell.

    • Tom,

      Thanks, its great to see that we are all trying to expand our knowledge on subject area that we are not familiar with. Kudos, for using real life experiences to help drive home the importance of thinking outside the box to motivate your class to look at deals differently.

    • Vida,

      Not sure where you gather in this article where I referred to Realtors as dumb, I actually applauded those who where in attendance challenging themselves to learn something that will give them and advantage. I was in the class to!!!

      Believe me no pun intended, I was using the class as an analogy. Yes some of the Realtors were oblivious to the sub2, but they were there learning and educating themselves about it.

      “Enjoying the Journey”

  2. Perhaps Marcus meant “ignorant” rather than “dumb.” Ignorance is the simple lack of knowledge, but dumb implies an inability or unwillingness to learn. Obviously, if the agents were in a class, they weren’t dumb, just looking to remedy their ignorance.

    As a real estate agent, I can confirm that there are both kinds in the profession. 🙂

    Thanks for sharing this, Marcus!

  3. Marcus, thanks for taking the time to write this article. I know about subject 2, and have used it once or twice, but I never seem to try to do it anymore. Maybe I just got better at doing bank loans. Anyway it always helps to be reminded there are other tools in our toolbox that can help you when you think all is lost on getting a deal going.

    • Jerry,

      Well sub2 is definitely isn’t for everyone and you have to be confident in what you are informing the seller about. When handling this kind of transaction educating the seller is the most important thing that you can do.

      “Enjoying the Journey”

  4. Interesting perspective. No doubt, there are a lot of dumb realtors out there but it is telling that you went to a class and found that most of the people there (except you) are realtors trying to learn about the process of selling a property subject to existing financing.

    As a working realtor, I no longer will work with people (almost always men) that focus on taking over payments, owner financing, wholesaling or writing offers subject to existing financing.

    Maybe it’s because I work in an area where these type of deals are less common but I’ve found that by focusing only on properties that meet some specific financing requirements means compromises in all other aspects of the deal.

    • Adam,

      Sub2 financing as you may already know only work with sellers in a particular situation and again it is not for everyone and I do not believe that it should be the only strategy that an investor use. You have to be able to navigate your way through a transaction and provide a value add for the seller if a traditional transaction is not manageable. There are many deals where I provide a value add by recommending that the seller hire an Agent that is familiar with their area and situation to get their property sold. Every lead will not be a deal, I subscribe to the theory that if you have to make it a deal then its not a deal at all.

      “Enjoying the Journey”

    • James,

      I did reference “real estate professionals” as Realtors but no pun intended believe me there are a lot of crappy wholesalers, loan officers, home inspectors, property managers……. I can go on and on but I can see I how she could have mistaken the title to address Realtors only.

      “Enjoying the Journey”

  5. Good Article Marcus,

    I would like to know the answer to the questions:
    Why is the lender important when structuring this type of deal?
    and Which type of financing cannot be structured as sub2 deal


    • Karl,

      Here are the answers to the questions regarding seller financing:

      1 & 2) Sub2 primarily helps owners that need to sell (job transfer, moving near family) but have little to know equity in the property, it provides them the opportunity to have someone else pay their mortgage, which will leave them in a position to do other things with the capital. The transaction should be set up through an escrow account so no money is changing hands directly. Also the transaction is backed by the property so in the event the buyer does not make a mortgage payment the seller can foreclose and do it again in need be.

      3) FHA Only all others can be structured as sub2, many people will talk about the due on sale clause that lenders have as a stipulation within the loan, but the lender never exercise that clause. It does not benefit the lender to execute that clause if payments are being made on time. They do not care who they receive payment from as long as they receive timely payments. It would not be a benefit to exercise the clause also because now they will have to go through the foreclosure process and loose money in the long run.

      4) Yes, you can structure an ARM in a sub2 deal

      5) The lender is important because each lender have different criteria when doing a sub2 also you will need to have the payout amount for the loan and the monthly payment amount and you will only be able to get that information from the lender directly. This will be done through your title co.

      6) Hardly ever as explained above

      7) Seller carry: the property is owned free and clear by the owner and he can exercise an option to finance the buyer the property directly on his terms. Sub2 is financing through the existing loan that is in place.

      Remember there are a lot of moving parts so this is only the tip of the iceberg. BP has lots of material on financing options.

      Hope this helps it you have any questions feel free to email me or inbox me via BP

      “Enjoying the Journey”

  6. Marcus,

    There are a lot of things that go into Subject 2. Over the years people have given this more of an option versus lease-option due to its a little more safer of an investment.

    But at the end of the day it comes down to educating yourself so you know whats going on so you don’t make bad investments.

    Antonio Coleman “Signing Off”

  7. Marcus,

    The title of this blog is a bit insensitive, obviously, as VIdal was quite offended and I must agree with Greg Powers. Yet there are a variety of ways to structure real estate investment deals. Subject-to, e pluribus unum, has its fans yet its not everyone’s favorite or preferred niche. What’s great for you is not necessarily favorable for others for whatever reason. Though I get your point on stating there should’ve been more REIs in the seminar, certainly, as many do utilize this deal structure. Chalk it up to lousy promotion of the seminar to non-licensees. If you are to promote a particular niche there are better ways to go about it, imo.



    • I’m a Realtor as well as an Investor. I’m here to tell you that an uneducated Realtor can screw up a good deal faster than anything else!! Most Realtors only know one maybe two ways to do a deal. In today’s environment that’s NG. If YOU are uneducated in the opportunities availiable via creative finacing then do everyone a favor and expend some energy towards correcting that..

    • Mary,

      Thank you for your feedback and it is well taken, it could have been a marketing spoof, but it was amazing to see how many Realtors where engaged, and they begin to think outside the box and had some amazing questions. I did not touch on this in the article but we did role play which brought the theory into practice.

      As stated before this is not a strategy that everyone will become familiar with but its always great to have additional tools and resources.

      “Enjoying the Journey”

    • Mary,

      Thank you for your feedback and it is well taken, it could have been a marketing spoof, but it was amazing to see how many Realtors where engaged, and they begin to think outside the box and had some amazing questions. I did not touch on this in the article but we did role play which brought the theory into practice.

      As stated before this is not a strategy that everyone will become familiar with but its always great to have additional tools and resources.

      “Enjoying the Journey”

    • Mary,

      Thank you, for your feedback and it is well taken, it could have been a marketing spoof, but it was amazing to see how many Realtors where engaged, and they begin to think outside the box and had some amazing questions. I did not touch on this in the article but we did role play which brought the theory into practice.

      As stated before this is not a strategy that everyone will become familiar with but its always great to have additional tools and resources.

      “Enjoying the Journey”

  8. As someone seeking to learn more about real estate investing, the pompous, condescending tone of this article really left a bad taste in my mouth. I am sure this is not the spirit in which Bigger Pockets was founded. Yes, you provided so good nuggets in this article (the importance of education and knowing how to utilize multiple tools). However, the negative tone made this akin to serving a 5-star steak dinner on a garbage can lid. I’m disappointed.

    • There is not sufficient space here to list all of the dumb, ignorant, lazy, deceptive actions by many of the Realtors I am involved with daily.

      Sure, there are Realtor jewels but boy do you have to kiss a lot of frogs to find one.

      • Marcus Maloney


        You are right there are some outstanding Realtors who have their clients best interest at heart, but likewise there are many that will tell the seller exactly what they want to hear and inflate the value of the sellers home just to get a listing. True story I had a lady tell me that a Realtor told her she could sell her house for 225k and the only new thing on the house was the roof, everything else was dated (late 80s early 90s worse house on the block). Recent gut rehabs comps were only selling for max 210k. Some people will do anything to try and get a listing. This is what gives real estate professionals a bad name.

        “Enjoying the Journey”

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