How does Subject too benefit the seller?

Question

I’ve been researching subject tos and I just just wondering, does subject to benefit the seller in anyway other than getting the mortgage liability away from them? The way I heard it explained is that you take over the existing mortgage and then you can either rent it or transfer the mortgage to someone for free but the videos I’ve watched never say anything about giving the seller anything other than money down to lock it up. I’m just curious, if anyone can give me a better explanation I’d really appreciate it, thanks!

Doug P. · Answer

@Jon LaBorde Debt relief is the #1 benefit for the seller in a sub2 deal. Depending on the situation and how much equity they have you may need to pay them moving money or even cash out some of their equity. But typically the seller can't afford or just doesn't want the house anymore and they're ready to walk way but they don't want their credit ruined by a foreclosure. So the investor steps in and takes over responsibility for the house.

If the seller has a lot of equity that they don't want to walk from you can also combine a sub2 with seller financing. Give the seller a 2nd mortgage for their equity and pay them out over time or when you refi.

Matt Devincenzo · Answer

In most cases that is the benefit to the seller is buying something they no longer want to (or can't) pay for. You can of course give them additional money if needed to achieve the sub-to.

I have a colleague working on one now. I forget the seller's story, but essentially a purchase offer would have been ~$70-75K with a $30-40K rehab IIRC. It's not in horrible shape, but it's old and outdated and been vacant for several years leading to a less than attractive home. He owes ~$82K so we're not able to make it work at those numbers. But if it is sub-to then the deal works for a nice base hit rental without needing to buy using a HML at 10% and points etc. The rehab is the equity in the deal protecting the seller if the property is held for any length of time. And as the buyer (my colleague) is now getting closer to closing it's starting to look like it might be worth just cleaning the place out and doing a very low cost rehab (paint, pressure wash and handyman repairs) for a quick sale. If they had bought using HML this wouldn't be an option and the seller would have needed to shortsale or bring cash to close.

Jane Ho · Answer

May I ask why seller would be ok with still have their names on the mortgage but not on the deed anymore? Also what if the bank noticed that the owner has changed?

How does Subject too benefit the seller?

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