What Is "Subject To" (SubTo) Financing - When Does It Apply

[Ken M.]

"Subject To" is legal when done legally. Don't fall into the "SubTo" fallacy.  Don't fall for false pretenders.

Not every situation benefits from Subject To. For instance, taking over someone's loan (Taking a property "Subject To" existing financing) makes no sense if you owe more than the property is worth. 

The most important feature of Subject To is being able to get out quickly. Loans have a "Due On Sale" clause which means the bank can call the loan Due and Payable on short notice.  So, you have to know what those parameters and solutions are in advance. Sure, you can save a lot, I mean A LOT, of money doing Subject To, but only if you do it correctly. This is not one you can look back on and say "I wish I had known . . . ". You need to know before going in.

1. Foreclosures are at an almost all time low. Most Subject To's are with distressed sellers. If people aren't feeling pressured, they don't budge. Moving is an emotionally draining event for most people.

2. Over 18,000,000 people refinanced into lower interest rates, making it easier to make their payments and less likely to feel stressed.

3. With very low interest rates on their current mortgage, most people won't want to give up the low payment and are afraid of the payment shock of borrowing the same amount of money at a higher rate to get into a new house.

4. Lending has tightened up, so fewer people can get a loan or find a property to move to.

5. Guru's & Mentors, for a small fee of $15,000 to $20,000 ;-) are teaching people the upside of Subject To. When it's the right market, with enough funding & knowledge, it works. But forgetting to mention the downsides and when it's the wrong market, it's a disaster.

And they don't mention the investigations by the state and feds when you make a mistake in the process. Why would they mention that? They won't. It's more profitable to convince tons of people to shell out $15,000 to $20,000 than to actually do Subject To's. If it was easy, everybody would be doing them. ;-)

The market is flooded with "New Subject To (SubTo) wannabes" and with all of the enthusiasm, it's like the Tulip Mainia crash. Lots of money spent, lots of time wasted, lots of people hurt in the process.

Learn "Subject To" properly, know what not to do, know how to respond when things occur, Practice Safe "Subject To", make lots of money.