Subto to househack P2
Hi! I need some advice.
Here's the situationDuplex in beautiful historic neighborhood.
Active at $290k.
Spoke to the agent - one unit is owner occupied the other is vacant - owner is moving out the country that's why she's selling.
$14,700 left on mortgage.
Asked agent is owner is open to creative financing he said yes.
I want to offer sub-to with no money down but I also want the agent to get paid his commission. I currently don't have the money for his commission or any misc. fees associated with closing. Has anyone ever used any resources to assist with commission or closing costs? Any grants, etc? Is it appropriate to ask the agent if I could also pay him monthly until his commission is paid off?
I could really use some advice! Thanks
Short Answer:
I am going to answer this assuming you are not using a Realtor.
In Arizona it is the responsbility of the seller to pay their agent the commission and I would assume it's the same in Michigan, so really this shouldn't be your problem.
I don't know the specifics of the Detroit market, but where I am in Arizona, as a Realtor, I have access to a form called an "unrepresented buyer." Therefore, if I represented a seller in the sale of their home and a buyer came as you did, I still have recourse to get paid my commission.
You can always talk to the agent directly about this. They will really appreciate that you want them to get paid.
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#3 BRRRR - Buy, Rehab, Rent, Refinance, Repeat Contributor
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Leave it to the sellers to take care of the realtors commission. You can not go around closing costs, unless you ask the sellers to pay it and add it as a balance on top of the subto offer.
Quote from @Eliott Elias:
Leave it to the sellers to take care of the realtors commission. You can not go around closing costs, unless you ask the sellers to pay it and add it as a balance on top of the subto offer.
So would they have to essentially pay to sell the house? Because if I come with no money down the agent still needs to get paid so they would have to come out of pocket?
Quote from @Ryan Mancuso:
Short Answer:
I am going to answer this assuming you are not using a Realtor.
In Arizona it is the responsbility of the seller to pay their agent the commission and I would assume it's the same in Michigan, so really this shouldn't be your problem.I don't know the specifics of the Detroit market, but where I am in Arizona, as a Realtor, I have access to a form called an "unrepresented buyer." Therefore, if I represented a seller in the sale of their home and a buyer came as you did, I still have recourse to get paid my commission.
You can always talk to the agent directly about this. They will really appreciate that you want them to get paid.
Thanks for the reply! For what it's worth I am a newer licensed agent.. the things they don't teach in school lol. I looked up the unrepresented buyer form, I see it but it looks like it's just acknowledging who you represent or if you represent both parties. So in my situation, coming with $0 down, would the seller have to pay out of pocket for their agent's commission?
Quote from @Alexandra Belle:
Quote from @Ryan Mancuso:
Short Answer:
I am going to answer this assuming you are not using a Realtor.
In Arizona it is the responsbility of the seller to pay their agent the commission and I would assume it's the same in Michigan, so really this shouldn't be your problem.I don't know the specifics of the Detroit market, but where I am in Arizona, as a Realtor, I have access to a form called an "unrepresented buyer." Therefore, if I represented a seller in the sale of their home and a buyer came as you did, I still have recourse to get paid my commission.
You can always talk to the agent directly about this. They will really appreciate that you want them to get paid.
Thanks for the reply! For what it's worth I am a newer licensed agent.. the things they don't teach in school lol. I looked up the unrepresented buyer form, I see it but it looks like it's just acknowledging who you represent or if you represent both parties. So in my situation, coming with $0 down, would the seller have to pay out of pocket for their agent's commission?
Welcome! I know, they don't teach the real life stuff in school. But this will only help you grow your tools that you use to help yourself and your clients!
The seller pays the commission anyway out of their pocket, so that should not be your concern. Regardless of how much money you put down. That is an agreement already made between the listing agent and their client seller!
You said you were buying a house subject to the first mortgage of only $14,700 and there's obviously a lot of equity in the property. Did the seller agreed to seller financed the difference? If so, was he/she willing to do so with no down payment? The reason I ask is since you said you had no money for agent so assume you have no money to give seller for downpayment. Yes you can structure without anything down but with $200k++ of equity the seller more than likely will ask for some down.
What am I missing here? Why in the world would a seller do a transaction subject to the mortgage with a balance of $14,700? You're using the wrong tool for the situation. And how do you miraculously come up with the money to cover the $280k-ish in equity if you don't have cash to pay an agent's fee? These creative solutions only work in certain situations. Sub to works best with low to no equity, a great loan/rate, and a seller with no other options. A subject to transaction is not in the best interest of the seller if the place is essentially paid off. How would this be better than a traditional sale where they walk away with $250k or more cash in their pocket?
You're likely going to have to educate an agent and seller on what subject to even is, convince the seller that it is a good idea to not take $250k+ cash in a sale prior to leaving the country, and then have to talk the agent into getting a smaller commission amount or being paid over time. I don't understand. Please let me know if I am missing something. I don't want to be a cynical, negative jerk. The purpose of these forums, as I see it, is for answers and encouragement. The likelihood of an idea or transaction working out is directly related to you analyzing this from the seller's point of view. If you can figure out how it is better for them, you may be on to something. I don't see that here with a sub to transaction. I hope that helps. You're on the right track trying to get yourself into a house hack.
Quote from @Travis Timmons:
What am I missing here? Why in the world would a seller do a transaction subject to the mortgage with a balance of $14,700? You're using the wrong tool for the situation. And how do you miraculously come up with the money to cover the $280k-ish in equity if you don't have cash to pay an agent's fee? These creative solutions only work in certain situations. Sub to works best with low to no equity, a great loan/rate, and a seller with no other options. A subject to transaction is not in the best interest of the seller if the place is essentially paid off. How would this be better than a traditional sale where they walk away with $250k or more cash in their pocket?
You're likely going to have to educate an agent and seller on what subject to even is, convince the seller that it is a good idea to not take $250k+ cash in a sale prior to leaving the country, and then have to talk the agent into getting a smaller commission amount or being paid over time. I don't understand. Please let me know if I am missing something. I don't want to be a cynical, negative jerk. The purpose of these forums, as I see it, is for answers and encouragement. The likelihood of an idea or transaction working out is directly related to you analyzing this from the seller's point of view. If you can figure out how it is better for them, you may be on to something. I don't see that here with a sub to transaction. I hope that helps. You're on the right track trying to get yourself into a house hack.
No I get what you're saying and you're not missing anything! She's just trying to leave so she's super motivated and is open to some type of seller financing. I haven't proposed anything yet - this information is from her agent. I think it could work because I highly, highly doubt anyone is going to offer her $290k. Comps are only $155k max. I was always taught that when your'e buying and holding, in it for cashflow, the purchase price doesn't really matter. So I was going to offer her the whole $290k if she'd do it on my terms (which would be sub-to transitioning into basic seller finance with a balloon payment). And then explain the tax benefits, credit benefits from her payments continuing to be paid, and steady monthly income to her as well. I don't know. It's just a really nice house in a beautiful neighborhood and I want it, but i also want it to make sense for her.
Quote from @Randy Rodenhouse:The seller only said she'd be open to financing but I got this info from her agent and haven't talked specifics. I wanted to drive by it first and see how I felt but now I'm even more in awe of it so I'm going to call the agent and see what her ideal terms are.
You said you were buying a house subject to the first mortgage of only $14,700 and there's obviously a lot of equity in the property. Did the seller agreed to seller financed the difference? If so, was he/she willing to do so with no down payment? The reason I ask is since you said you had no money for agent so assume you have no money to give seller for downpayment. Yes you can structure without anything down but with $200k++ of equity the seller more than likely will ask for some down.
Reading this thread I noticied a few things:
1. I wouldn't buy a property regardless of how opportunistic the financing sounds if I am overpaying 150k on a 150k property. You will have to wait a really really long time for that to appreciate to simply break even. You might be burying yourself before you even get started.
2. If you're an agent, you can talk to your broker about deferring a portion of your commissions to the agent or seller as an extra incentive for negotiations.
3. I wouldn't force this deal at -100% equity. Better to save up a little use an FHA loan with seller's assist and buy something at market value
hope this helps
Quote from @Alan Asriants:
Reading this thread I noticied a few things:
1. I wouldn't buy a property regardless of how opportunistic the financing sounds if I am overpaying 150k on a 150k property. You will have to wait a really really long time for that to appreciate to simply break even. You might be burying yourself before you even get started.
2. If you're an agent, you can talk to your broker about deferring a portion of your commissions to the agent or seller as an extra incentive for negotiations.
3. I wouldn't force this deal at -100% equity. Better to save up a little use an FHA loan with seller's assist and buy something at market value
hope this helps
As sad as I am to admit it but i think you're right! I think I could pull together 20k to give down and maybe offer 200k? Otherwise it just doesn't make sense
Quote from @Alexandra Belle:
Quote from @Alan Asriants:
Reading this thread I noticied a few things:
1. I wouldn't buy a property regardless of how opportunistic the financing sounds if I am overpaying 150k on a 150k property. You will have to wait a really really long time for that to appreciate to simply break even. You might be burying yourself before you even get started.
2. If you're an agent, you can talk to your broker about deferring a portion of your commissions to the agent or seller as an extra incentive for negotiations.
3. I wouldn't force this deal at -100% equity. Better to save up a little use an FHA loan with seller's assist and buy something at market value
hope this helpsAs sad as I am to admit it but i think you're right! I think I could pull together 20k to give down and maybe offer 200k? Otherwise it just doesn't make sense
Try to get something for market value. Use some seller's assist if need be. It's ok to overpay to account for the seller's assist but I wouldn't pay 50k more for a property worth 150K
