Seller financing with subject to

3 Replies

Hi everyone,

I’m currently looking at a deal in Massachusetts. I’m trying to figure out if it’s possible to do seller financing with a subject to on the current mortgage?

About the deal

18 units with an asking price of $2 million

The seller currently owns $500k

She is willing to carry the note but can I do a subject to to the $500k she owes?

Any info or point in the right direction would be helpful

Thank you!

-Tom 

Originally posted by @Tom Manna :

Hi everyone,

I’m currently looking at a deal in Massachusetts. I’m trying to figure out if it’s possible to do seller financing with a subject to on the current mortgage?

About the deal

18 units with an asking price of $2 million

The seller currently owns $500k

She is willing to carry the note but can I do a subject to to the $500k she owes?

Any info or point in the right direction would be helpful

Thank you!

-Tom 

 Subject To implies that you are taking over the loan and making the payments. I doubt she is selling for $500k if the value is $2MM What you probably need is a Subject To for the underlying loan amount PLUS a second note for the remaining amount of whatever you negotiate. In the alternative you could do a Wrap for the entire negotiated amount. Yes, it is doable. Yes, you need an attorney, in my opinion. The one thing you need to know is that Subject To or a Wrap will probably violate the Due on Sale clause the bank has in the contract with the seller. Almost no banks are calling notes due on this issue right now, but they could in the future.That means you would have to come up with financing to pay off the entire loan. You would receive notice from the bank and have a couple of months to refinance or sell the property. If the seller is wiling, it can be done.

Thank you Account Closed! 

Sorry I wasn’t so clear. I would Be buying it for 2MM while she continues to hold the current loan for $500k. That’s where I’m getting the subject to from. 

I am Worried about the bank calling the note due. I will have refi out at that point. Which is doable. 

She is willing to do a subject to and work with my. This could be a great opportunity if I get Everything lined up right

Should be okay. Banks aren't calling loans due at his point. Make sure the numbers work, that you are getting positive cash flow, ask for the T-12 and have your CPA go over it, know your expenses, decide if you are going to manage or if you are going to hire a management company. Have the roof, water lines, underground sewer lines, electrical and heating and AC units checked. Keep money in reserve for capital expenses. Have an exit strategy.