Developer · Point Pleasant Beach, NJ · Member since 2015 · 303 posts · 216 votes
I’m wondering if anyone has used any creative techniques with regards to buying a home worth less than the mortgage owed. The one in particular that I like is on its way to auction but I would love to try to work something out ahead of time. I know you can negotiate a short sale but has anyone ever been able to negotiate other creative terms with a bank?
Real Estate Agent · Philadelphia, PA · Member since 2018 · 416 posts · 396 votes
7y
@Christopher Lombardi I know a guy who buys underwater property "subject to". From what I understand, which honestly isn't much about the strategy, is that the mortgage is transferred to your name and you assume the payments. There was a situation where he assumed the mortgages of 6 properties payed off like 7k in back taxes, and "purchased" the LLC containing the properties for a dollar.
@Brett Goldsmith you seem you may know more about these types of purchases. Would “subject to” be a viable option in the OP’s case?
Investor · Los Angeles, CA · Member since 2012 · 1k+ posts · 500 votes
7y
If a new buyer wants to purchase a home with no equity in an equitable position, a short sale is the only option. 1st MTG settlements are rare options for homeowners who own an upside property and want to settle the debt in less than full, and keep.
Real Estate Agent · Philadelphia, PA · Member since 2018 · 416 posts · 396 votes
7y
@Christopher Lombardi I know a guy who buys underwater property "subject to". From what I understand, which honestly isn't much about the strategy, is that the mortgage is transferred to your name and you assume the payments. There was a situation where he assumed the mortgages of 6 properties payed off like 7k in back taxes, and "purchased" the LLC containing the properties for a dollar.
@Brett Goldsmith you seem you may know more about these types of purchases. Would “subject to” be a viable option in the OP’s case?
Investor · Los Angeles, CA · Member since 2012 · 1k+ posts · 500 votes
7y
I like buying homes that have equity. Very rarely does it make sense to acquire a property that is upside down, or to throw money at a property that has no equity. In rare circumstances, I guess it could be a speculative play.
Acquiring a significant upside down property via subject-to is a common move by scammers.
In a Subject-to you don't have a mortgage transfer into your name. You solely take title subject to the existing lien(s). You need to assume a loan to incur the liabilities of the loan and to become the new borrower.
Paradise, CA · Member since 2015 · 1k+ posts · 871 votes
7y
Creativity and mortgage lending/real estate should rarely (if ever) be used in the same sentence. There is no need to be creative and doing so should cause concern. If one (Not assuming anyone is that "one") cannot purchase through traditional means, meaning, engage a seller, get under contract, negotiate a short sale through the lender, get approval, and close the deal with cash or with traditional financing, maybe one shouldn't be engaged in this business? Why the need to get creative? That usually means one can't or won't do things the right way. I'm always amazed at how people try to get lenders/financial institutions to change the rules to fit their situation instead of changing their situation to fit the rules (Again, making no assumptions the OP or anyone else fits that declaration).
Scammers love "subject to" because the scammers only have an upside potential and no downside because they have no skin in the game (Outside of maybe reinstating a defaulted loan) and, no liability for being wrong. All of the risk is on the seller. Even honest subject to buyers err to the detriment of the seller because they typically have massive misconceptions on what they are engaging in. One of the biggest misconceptions is "assuming" the seller's mortgage. You aren't assuming it, you are taking it over subject to existing liens/loans/mortgages in place, and doing it without the consent of the lender, and in doing so, risk accelerating the loan's due on sale clause.
Many of these "buyers" default and the seller is left holding the bag. Many of these buyers try to get one over on the lender to avoid the due on sale clause with tricky notes, unrecorded agreements, transfer of deed, insurance, taxes, etc..
Many states have enacted laws and regulations to thwart these types of transactions, and many have teeth in them to include both civil and criminal penalties now.