What is "Subject to..." ?

Question

OK, can someone out there explain what is meant when someone acquires a property " subject to..." ?  Subject to WHAT ?
I believe this means subject to existing financing, but I'm not sure.  If so, how do you avoid the Due on Sale Clause?  Or is this done with the approval of the mortgage company?  What is the exit strategy for such a purchase/acquisition?

If you can explain in bullet format (A,B,C,...1,2,3,..) I sure would appreciate it.  Thanks in advance.

Randall Mixon · Answer

Harbinger is correct; however, EddieBoy is asking about something else entirely.  If I find a Seller so inclined, I can get the Deed (usually in a "kitchen table closing"), and I now own the house "subject-to" the existing financing.  The loan stays in the original borrower's name.  The lender only wants the payment, so the Due On Sale Clause is a moot issue.

Randall Mixon · Answer

LC is short for Land Contract.  When using a Land Contract, you are buying without paying off the underlying loan(s), so yes, you are buying subject-to the mortgage(s), but traditionally, sub2 means to get the Deed.

Randall Mixon · Answer

Your exit strategy can be anything.  You have full control, because you own the house.  I prefer to Lease Option those houses, but you could also sell with a Land Contract, provide actual owner-financing with an AITD (wrap), or sell via subject-to with your Buyer (not recommended).

Lazette Parks · Answer

Hey Randall,

What is the difference between a Quit Claim and a Warranty Deed, do you still do the closing at title with a Standard, Land Trust, and they write up the warranty deed. How is this done? Thank you so much!

Randall Mixon · Answer

Do an internet search for John $Cash$ Locke.  He is the premier sub2 teacher/lecturer in this country.  William Tingle is also very popular.  And, as always, when it comes to creative real estate, attorney Bill Bronchick is a good place to get accurate info.

Randall Mixon · Answer

Dude, that is EXACTLY a Subject-To transaction.  There are numerous Courses available on the Topic.  Granted, this discussion board has no sub2 forum, but if you go to some of the other discussion boards, you will see a lot of info on it.  And I never get a Quitclaim.  I always get a  Warranty Deed and record it.  Just because you have a LC, I don't see where you have more incentive to pay.  Either you are going to pay or not.

Randall Mixon · Answer

Why not just get the Deed?  What if the Seller gets a judgment against him in the meantime?  Or child support lien?  I have students in your neck of the woods, so yes, there are people grabbing the Deed in your state.  We do a "kitchen table closing" and have no need for an escrow.  To date, not a single lender has called the Note due (though a few have threatened with a "form letter").

Account Closed · Answer

right-on...

Account Closed · Answer

That is changing the discussion and in my opinion not considered a subject to transaction.  You have not formally agreed to pay the note.  You may indeed pay it but there is no formal agreement from what you are saying.  I'm not saying it isn't done, I'm just saying don't call it a subject to transaction.

If a seller just gives you a deed then what is the obligation on your part? there is none.

Of course if you just get a quit claim deed then you really dont' have much anyway.  At least with a warranty deed and a formal contract for deed or land contract you can get title insurance with it and a formal transfer.

There is no reason for a lender to call the note due, especially if it's being paid as agreed.  They don't want the property either.

Account Closed · Answer

I'm not familiar with the term LC with the seller.  Sub2 is a common reference in this area or at least with the escrow companies I work with.

What is &quot;Subject to...&quot; ?

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What is "Subject to..." ?