The legality of Subject to's in baltimore

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Ned CareyPro Member
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Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
11y

@Jamal L. Many want to do sub2 because they have no money to start. I suspect that is your situation. 

The problem is land lording takes cash reserves when problems come up (like vacancies or repairs). If you don't have money for those problems then you risk not being able to pay the mortgage. Then the previous owner get foreclosed on and you are on the cover of the Baltimore Sun for taking advantage of people.

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  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    11y

    Legal, yes.  Smart for the seller, probably not.

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    11y

    Sub to in the wrong hands is a very dangerous position for a seller to be in .. ( if they have credit and equity to protect)

    And its an incredibly dangerous tool for a undercapitalized new investor.. who can really twist a seller up.

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  • Jamal L.
    OP
    Investor · Baltimore, MD · Member since 2014 · 399 posts · 156 votes
    11y

    I appreciate your response. @Jay Hinrichs @Wyane Brooks. Do any of you have any recent experience with subject to's? 

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  • Ned CareyPro Member
    Moderator
    Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
    11y

    @Jamal L. Many want to do sub2 because they have no money to start. I suspect that is your situation. 

    The problem is land lording takes cash reserves when problems come up (like vacancies or repairs). If you don't have money for those problems then you risk not being able to pay the mortgage. Then the previous owner get foreclosed on and you are on the cover of the Baltimore Sun for taking advantage of people.

    4Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    11y

    @Jamal L.  yes  

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  • Jamal L.
    OP
    Investor · Baltimore, MD · Member since 2014 · 399 posts · 156 votes
    11y
    Originally posted by @Ned Carey:

    @Jamal L. Many want to do sub2 because they have no money to start. I suspect that is your situation. 

    The problem is land lording takes cash reserves when problems come up (like vacancies or repairs). If you don't have money for those problems then you risk not being able to pay the mortgage. Then the previous owner get foreclosed on and you are on the cover of the Baltimore Sun for taking advantage of people.

     Hey Ned thanks for the reply. I didn't clarify my situation, so I'll take the time to do just that now. I have a property under contract which the seller just wants to get off their hands because they can't manage it. The property is in a c-d class neighborhood and the mortgage is less than $300 a month which I can afford to pay. She only owes 5k on the mortgage all together. However the property needs about 10-15 of repairs to be in what I would consider decent rental condition. I was inquiring about subject to's because I would rather keep 5k in my pocket for unforeseen repairs rather than buy the property out right to aviod paying  taxes and transfer fees at closing initially. That way I can cash flow on the property and accumulate funds for those expenses prior to buying. I would like your feed back Mr. Carey. What are your thoughts? 

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  • Ned CareyPro Member
    Moderator
    Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
    11y

    This could be a situation where subject 2 makes sense.

    This indicates you may not understand what subject to means. You DO TRANSFER the property in a subject to. You are taking title "subject to " the existing mortgage. The title does change to your hands and therefore you pay transfer taxes and closing costs.

    Perhaps another way to structure this is a delayed settlement or an option to buy. 

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    11y

    @Jamal L.  pony up the 5k and be done with it... is my thought more brain damage trying to save a few bucks than what its worth... Or as Ned says  option to purchase give her a little money pay the monthly payments to her  get the right to rehab the house then buy it if that's what your looking to do... All though I would personally never put a significant amount of money into a property I was not the owner of.. to many things could come up that would preclude a clean transfer of title and a clean title especially In those type of areas  many time the sellers have issues you won't know about until you open escrow and and get a peak at a pre liminary title report..  Or what ever it is you people in Baltimore get from your title insurance companies.. Or maybe you use attorneys ... and they get you title commitments either way... not enough money being saved to risk any of that in my mind

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  • Jamal L.
    OP
    Investor · Baltimore, MD · Member since 2014 · 399 posts · 156 votes
    11y

    Thank you for your comments they are factors I definitely want to consider. 

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