How to complete a subject to deal

Question

Hey BP,

I'm trying to complete my first "subject to" deal. Can anybody help me understand if I have to use an attorney inside of the county or town that the property is in? Both me and the owner lives in a different area than the property. And do I call attorneys and ask do they do "subject to"? or do they use different terminology? Thanks!

Byron Scott · Answer

Thanks Account Closed I am a buy and hold investor so I'm going to rent it out. I have multiple units and reserves. I am going to find out if his payment works with market rents. Do I have to have a local attorney or could I get someone that's outside of the area but in the same state and region?

Account Closed · Answer

It's best to use someone who practices law in the county the property is in. The idea is that if there ever is a problem, that attorney will need to protect your interests in court. Most attorneys have a hard time protecting the interest of an unusual agreement they didn't write. Use an attorney in the same county if possible.

Account Closed · Answer

First check you bank account and make sure you have enough money to make the payments without fail. Then we need to know what your reason for buying it is. Are you going to live in it, rent it out, rehab and list, sell on lease option; so more direction can be given. You want to find a real estate attorney familiar with local laws to the property. Only a few attorneys know how to do these properly. It isn't a common transaction. Some will tell you it's illegal. You tell them they should get a refund on their law school tuition. ;-) An attorney may know the transaction as Subject To but they may also know it as "taking over his loan". It isn't really an "assumption". With a Subject To the bank is Not involved. With an assumption a bank IS involved. Make sure you get in writing that the seller knows his loan isn't going to get paid off until some point in the future. For sure get a title report. There is a bit more to it but that will get you started.

Stanley Bronstein · Answer

It may or may not be a question of illegality, but it is quite probably a contractual violation of the loan docs on the underlying loan (if it's done without the lender's approval). Illegality implies criminal wrongdoing. A contractual violation is a civil matter. Totally different things. It's like comparing apples and grapefruit. Based upon my experience, I generally avoid subject to deals and in most cases would not represent a client wanting to do one.