My first Sub2 maybe-Help

12 Replies

Hello everyone, I think I might be doing my first Sub2 deal and I need some insight on the deal.

The property owner (executor), who was left the property, stated that he has not made any payments for of a year on anything, mortgage, taxes, etc. He also stated that his lawyer (appointed thru the will it sounds like) stated that the property is in foreclosure. The owner said that the lawyer is not responding to his calls, so this may be a problem for the deal.

I then suggested that I will make up the back payments, and give him an additional 6,000 (for a funeral he needs to pay off), and he will deed my the property in return. All together it will be around 17,000. The owner stated that there is a 2nd mortgage as well.

My question how can I pull this off with the paperwork and so fourth. And is there a way to get rid of the 2nd mortgage and back taxes beside the obvious thing of paying them off.

I'm sorry if I sound naive in this post, but this is my first attempt at a Sub2 deal and I want this deal to happen. Thanks everyone. Roc


A couple of suggestions in the general order you mention things. You have left a lot of needed info out before a better answer can be given but this is what I would do given the facts you have stated so far. You need to find out what this property is worth today in as is condition (not what he thinks it is worth or was worth when he inherited it). Then you need to find out the repairs needed. Have a contractor walk through if the other numbers warrant this (which I doubt but I am getting ahead of myself). We also need to know what is owed on both the first and the second. You also need to know is he willing to walk away and give you the deed. Based on what you have said, I assume he will if you make up the back payments and give him an additional 6k for the funeral payoff. If he will deed to you if you give him the money, the next problem is the 17k you are estimating you need to hand over to get the deed. 17k is a lot of money. I would not be handing this over unless the property has mucho equity. How much equity is a personal question for you to answer but I probably would want at least 20% (you didn’t state what the property is worth and this means a lot). If the property is low priced (i.e. 60k or under), I would probably be walking away now. But if this is a higher priced home (150k + or near the median of the market or a little above but no more than say 250k unless you live in cali or somewhere else high priced), you may be ok.

Also, this 17k does not include whatever the needed repairs that will probably be needed since he has essentially abandoned this home as of now. You need to find out what he NEEDS, not what he wants. I probably would not be paying 6k for other expenses, again, unless I was getting sufficient equity to make it worth my while.

As far as the back taxes, they are going to have to be paid. If you are paying them current, he better be taking that expense off the price you are paying because that was his responsibility and I am not paying them to be nice guy. If he will not credit the taxes, late fees, attorney fees and any other fees to bring it current by reducing his price this amount, then move on now.

The second also needs addressed. You need to find out what is owed and how much to bring current. They won’t be discounting it at this stage unless a short sale on the first is an option but I am not going into that as that would take many more pages than this (and probably is not going to happen based on what you have said so far).

My recommended plan of action would be to get written authorization to talk to both the first and second mortgage and find out where this guy stands. Find out what it will take to bring both current. Find out what is owed in back taxes. You need to also make sure this guy is really the owner and get authorization to speak to the attorney handling this will (don’t call him, go see him) and see if it has dispersed or if this person will eventually get it but has not yet.

Based on what you have stated though, this does not sound like a deal at this point. There are too many ifs and buts and not enough concrete info to get anymore specific than the above. But it will be a good learning experience for future deals so do the legwork to learn the process. The required work shouldn’t take more than an hour or two give or take.

Remember; don’t get attached to any deal or house. This house is a piece of inventory to you as an investor, nothing more. Don’t fall in love with every potential deal or you will drive yourself out of this business (and crazy). This is just a widget that needs to put money in your pocket or there is no reason to get involved.

Good luck

Mike C

Wow thanks Mike for the great reply. I've been through the property before and it really does not need too much work really paint and carpet. But that was a while back and I will need to go through it again.

As for the equity I will have to figure it out. i spoke to the owner and today and explained to him that I would need to get authorization to contact the mortgage holders.

What type of authorization form will I need the owner to sign in order to contact the mortgage holders?

Thanks a lot Mike, I will post a follow up tomorrow and let you know where I'm at with this possible deal. Thanks again


It is nothing fancy. You can right your own or find one online without much trouble. Make sure it includes: the owners of record, the property address, the loan number (VERY IMPORTANT), signatures of all parties along with their printed names, SSNs if possible, a line saying you have access to their account information and if you want to be really thorough, put in the legal description of the property (which is usually not needed).

A piece of paper saying something like: I, _____ and ____, the owners of the property at ______ and with the loan # _____, do hereby authorize Roc (or your company name) access to my account information.


Company name if applicable

Roc printed name
____ signature

Homeowner 1
Printed name
_____ Sig
Homeowner 2
Printed name
_______ Sig
______ SSN

I always try to get the SSN numbers to verify I have true permission and didn’t just make something up. They will usually give it to you. You may not need it but I would rather have it and not need it than vice versa. If you wanted to be really thorough, you could get it notarized, but that has never been required of me before so I would skip that.

Fax it to a specific person if possible (or if local I would go in and talk to someone) and make sure the account is properly noted in the notes so you don’t have to keep faxing this in.

I personally would not walk through again until I was pretty sure I had a potential deal. Your time is your most valuable commodity. Find the value first and find out what the owner really needs and estimate what he really owes (hopefully he has some idea where he stands but it sounds like he may not) and figure out if it is even worth talking to the first and second. Then if it looks good, you can sign a contract on the spot contingent on your satisfactory inspection (your second walk through with a pro if you don't have much experience) and verification of the numbers he has given you regarding past due amounts, etc. because you want to get it under contract if it really is a deal, which is up in the air right now. Then get the 1st and second mortgage info, verify all his numbers and adjust your contract a bit to the exact numbers. That is what I would do.

Edit: My made up form did not transfer as I would like but I think you get the idea.

Mike C

This is a property that is part of an estate - it is going to be probated. There could be other heirs involved. The executors themselves might not be on the loans, so you have to get past that too by getting the executors to notify the lender that the Estate of the deceased is now handling matters.

And there might be other claims to be paid out by the estate, and if the property is the sole asset the sale of that asset will have to happen to satisfy claims.

Just my $0.02 worth.

Thanks guys I will keep everyone posted about whats happening. Thanks again everyone!

One quick question everyone, I'm getting the executor to sign the authorization form Tuesday or Wednesday.

Do I have to get his sister name, SSN, etc as well since the loan was originally taken out by her? Thanks

Hey guys I spoke to the executor , and he showed me paperwork in which the bank country wide now bank of America is now taking him to court.

How much is this going to change the short sale process? Thanks


As Steve suggests, if this has to go through probate before disposing of the property then this is probably an even bigger waste of time than I thought. I had assumed from your first post that the estate was uncontested or through the process to the point where the disposition of the property could go on unheeded. If as Steve also suggests, that the estate has to liquidate the property to pay taxes or split gains from multiple heirs, then they will want to sell the property and won’t be able to do a sub2 deal as they will need cash. That is obviously bad from your point of view.

Assuming this has been through the probate process and is ready to be sold (probably a bad assumption based on Steve’s input), then you need the get the executor to sign the authorization to release form for the property, a copy of the power of attorney or court appointed order showing they have power of attorney and a copy of the death certificate showing the name of the property owner and enough of her info showing she owned the property (I have never done a probate deal so this is what I would get and could be a bit off here).

Regarding the paperwork that country wide is taking the executor to court, that is probably part of the foreclosure process in your state. That is expected if they haven’t made a payment in a year. This won’t really affect a short sale except for the time it takes to complete which could take longer than the foreclosure action, especially if there are probate issues. Does country wide know the owner is deceased and is the court action just listing the homeowner? You were originally asking about sub2 and now you are wanting a short sale? A short sale is a whole new ballgame and not easy to explain in the best of circumstances, let along with probate issue potentially. You need more info.

As suspected, unless things go great this is probably not a deal either way, especially with probate/estate issues. You can still learn from it though. Have you figured out the value and the real market value? What exactly was the court paperwork for? Foreclosure starting and/or how far in the process or foreclosure almost complete? Is the action in the name of the executor or the original homeowner? Many more questions than answers at this point.

Mike C

Actually, before you do anything, you should also check out some of the posts in the probate investors forum here on BP, and check out the Nick J's post ( In a nutshell, he worked on a deal that shorts the second, and assumes the first.

Whether or not this property has been probated, and regardless of however much is owed on the property, you need to first know how much you'd be willing to pay for it. What is it worth? BoA held both the first and second liens in Nick's case, but that really doesn't matter. What does matter though is that BoA (either in late May or early June) issued a statement indicating that it (and other banks) were accepting short pay offs of 5%. (Check out the following post [], and do some creative Googling on it for more info.) The point is that perhaps something like this might also work for you.

Nevertheless, you don't have to do it exactly the way Nick did it. You could negotiate to short both the first and second. The main thing is that you understand why Nick did what he did, and then apply similar logic to your situation. Ultimately, your all in amount (including purchase price, any rehab, and holding costs) should be no more than 70% of the ARV.

One of the great things about this deal, IMHO, is that it has enough potential warts that will scare off most of your competition. One person's trash is another person's treasure. This opportunity--if structured properly--is a potential gold mine. :cool:

Some good advice, Dory. The OP should definitely check out the probate area. I didn't even know their was one. LOL.

Thanks everyone for the great info, like I said before I will keep everyone posted.

Roc, did you come up with a after repair value on the house?

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