Best Way to Find Subject To Financed Properties

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Ken M.
Investor · Get yourself trained before doing something inadvisable. · Member since 2024 · 3k+ posts · 1k+ votes
8mo
Quote from @Justin Lewis:

What's the best way to find subject to properties? 

I have plenty of ways that I find "Subject To's" that work. I won't discuss that here, but @Don Konipol is right. It's a transaction you have to understand and you make the offer to the seller. One of the big drawbacks, is that the seller will want to be released from the loan eventually, so they can buy another house. They will eventually contact the lender and tell them they have sold the property, which effectively puts you in a dangerous position with the Due on Sale clause of the mortgage.

There is a "guru" out there who doesn't mention this and when it's brought up misrepresents the solution. People are being sued because of it. I can provide the case numbers when necessary. Anyway, it's legal to do Subject To when it's done legally. Just be very careful and get trained properly.

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  • Don KonipolBusiness Member
    Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes
    8mo

    Few if any properties will be advertised as seller willing to let their mortgage remain in place and violate the due on sale covenant when they sell.  I have advertised just that at times because I knew I could obtain a price 10 -25% over market value that way.  

    Most sub to transactions are MADE in that the purchaser recognizes that the seller is “upside down” with the debt equal to or greater than the property value. The buyer than makes an offer based “subject to” the existing loan, thereby obtaining a 2.75% or 3.5% mortgage with little down payment. Further, a 6% broker fee is a real hurdle, though not always  insurmountable in these type transactions.  Biggest downside to seller are (1) seller remains personally liable on a debt tied to a property they no longer own and (2) as a result of (1) the sellers ability to finance another purchase is severely and adversely affected.  And even with all the legal protections attorneys can come up with, these two facts remain in place.   So for the seller it’s almost always a matter of having no better alternative.

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  • Ken M.
    Investor · Get yourself trained before doing something inadvisable. · Member since 2024 · 3k+ posts · 1k+ votes
    8mo
    Quote from @Justin Lewis:

    What's the best way to find subject to properties? 

    I have plenty of ways that I find "Subject To's" that work. I won't discuss that here, but @Don Konipol is right. It's a transaction you have to understand and you make the offer to the seller. One of the big drawbacks, is that the seller will want to be released from the loan eventually, so they can buy another house. They will eventually contact the lender and tell them they have sold the property, which effectively puts you in a dangerous position with the Due on Sale clause of the mortgage.

    There is a "guru" out there who doesn't mention this and when it's brought up misrepresents the solution. People are being sued because of it. I can provide the case numbers when necessary. Anyway, it's legal to do Subject To when it's done legally. Just be very careful and get trained properly.

    2Reply
    • Justin Lewis
      OP
      Real Estate Agent · Orem, UT · Member since 2017 · 36 posts · 13 votes
      8mo

      @Ken M. So helpful! Thank you so much!

      1Reply
    • Justin Lewis
      OP
      Real Estate Agent · Orem, UT · Member since 2017 · 36 posts · 13 votes
      8mo

      @Ken M. So in this case, is it better to make subto offers with balloons ?

      0Reply
    • Ken M.
      Investor · Get yourself trained before doing something inadvisable. · Member since 2024 · 3k+ posts · 1k+ votes
      8mo
      Quote from @Justin Lewis:

      @Ken M. So in this case, is it better to make subto offers with balloons ?

      Balloons are horrible. Unless it's a 25 year balloon :-) Most balloons mature at the wrong time. I'll send you a DM.
      1Reply
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