Subject to financing?

3 Replies

I need some guidance on subject to and I’m not sure if it’s a good idea. For folks who are familiar with subject to, could you please provide me your input whether it’s a yay or nay?

There’s this really nice house in my area that my wife is in love with, it’s on a corner lot with one side being on a busy street. It was renovated two years ago and been sitting on the market since then. It would have compd for $650k (4500 sqft) if it was a block further. Price was dropped down at some point to $450k, was under contract but fell through due to financing issue on the buyer’s side. It was relisted again for $499k with a different agent but still sitting on the market 6 months later. I remember from the initial listing agent a year ago that it had a loan balance of around $430k, but could be less now. I have my money tied up in other rentals as I’ve bought 11 units this year and I’m working on getting my score higher up and improving my debt to income ratio. I was thinking perhaps a subject to would be a better option to get the house for what’s the seller’s current balance, this way I get it off her hands and I get it at a better price without having to go through current conventional financing. For subject to experts, do you think this is a good idea? Any risk besides due on sale clause? How would you structure the deal and the purchase contract. Any input would be appreciated.

Thanks for your contribution!

ZK

Have you even approached the seller to see if they would consider it? It seems unlikely that they would be so desperate as to hand the deed over to a complete stranger while maintaining a debt of $433 but I suppose crazier things have happened. It seems you would approach the owner first to see if they would even consider it before spending too much time fantasizing about it.

Originally posted by @Nathan G. :

Have you even approached the seller to see if they would consider it? It seems unlikely that they would be so desperate as to hand the deed over to a complete stranger while maintaining a debt of $433 but I suppose crazier things have happened. It seems you would approach the owner first to see if they would even consider it before spending too much time fantasizing about it.

this is all sellers risk.. not buyers.. maybe you approch them with a lease with option to purchase.. having them deed you the house and keep loan in there name is very risky to them.. One if you default its a nightmare for them.. plus they probably cant buy anything else with that mortgage on their fico.. if they ( seller ) get advice from any real estate professional I suspect that advice would be to not deed the property over unless they got a SUBSTANTIAL amount of cash out of you then maybe its worth their downside risk. 

 

@Nathan G.

I haven’t approached them yet cause I would like to talk to people who have used that approach. From researching online, there’s the option of taking over the current mortgage and transferring the deed, but some of the investors that have written blogs about this , mentioned approaching the lender to transfer the mortgage under their name. For investors who have done that approach, I’d like to learn more on how they approached these lenders. This house has been sitting on the market for close to 2 years, the investors who flipped it have been under water for a while. If they couldn’t sell they’ll either short sale or foreclose which means more competition.

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