Subject to or not necessary?

8 Replies

Hey all,

Just a quick question regarding subject to's / wholesaling. I'm talking with a homeowner now, and they are motivated to sell due to their job in jeopardy. They wish to sell for the amount they have left to pay on their loan, nothing more (I will find that number out tomorrow and if it is even worth it). I saw on their records that they took a loan out for 325K about 11 years ago so hopefully they've paid some of it off. I have some trouble with comps, when I see very similar homes going for 280K and 100K (maybe it was in foreclosure)? Anyways, if they owed 250K and hypothetically the ARV was 250K ( *70% - ~2K repairs - 3K assignment) = 170K. Obviously this wouldn't work for them. Is this just a deal to pass up on? If they were to come up with the rest of the money on their own, would I still need subject to in the contract? Even if the buyer pays the full 250k do I have to mention the subject to?

Thanks in advance!

@Tyler Silver is wholesaling your only option? You're gonna want to learn more about the existing financing. You never sub-2 bad financing, but if the financing is worthy, is there any reason your seller would object to you using his credit?

Tell me something, what would this project rent for? What sort of neighborhood is this in? If the financing is solid, would you consider learning to do a sales-lease option? Perhaps you know a buyer who would consider such an exit strategy.

All the best.

Hi @Tom Mole  

I met with the owner and saw the property.  He owes 265K on his mortgage and is up to date on payments.  The area is not the best, but it is walking distance to a train station to the city.  After looking at recently sold comps (250K), I saw on the market there are 2 nearby similar properties on the market for 200-205K for 6 months - 1 year decreasing from 270K. I spoke with the realtors and there isn't any damage to these properties the owners just want to get rid of them - one is renting for $1800.  The property I saw would rent for about $2000 since it has an extra room.  

@Tyler Silver , it sounds like you found a couple of better deals. Have you made offers on them yet? They, at least, get closer to the 1% Rule. 

What is this neighborhood really like? If it's a C or D, are you ready for all the work it's apt to take to keep these properties performing? I don't know anything about the NY marketplace, so I leave that to your own better judgment. 

In any case that sub-2 deal doesn't seem to make sense in light of the other two properties you found. Perhaps some kind of seller financing would work with these new projects. Keep us updated please. Good hunting.

Yes, pass on the subject and go see about the comps, however, just chat with the Realtor and see if a sub-2 can be done or a L/O with them getting their commission, something about Realtors, the like to get paid. As Tom said, need to look at all the options and not look at things with blinders on.....well, he didn't really say it that way, but I bet he meant something like that. :)

Thank you @Tom Mole   and @Bill Gulley   for your insights.  I am not interested in buying this property for myself, rather getting it under contract to wholesale to a flipper.  Those ~200K houses have been listed with the realtor for 6+ months so if an investor was interested I'm sure they would have scooped it up.  I discovered these after I spoke with my motivated seller who still owes 265K, so it just seemed like a deal to pass on.

Hi Tyler,

Here is a form to gather info.  The existing financing is important.


Address __________________________________________ Date _________
Location / Cross Street _______________________________ Map Pg# _____
Seller _______________________ Ph# ____________ Alt. Ph# ___________
Listing Agent _________________ Ph# ____________ Alt. Ph# ___________

__Occupied / __Vacant _____ Bed/_____ Bath Construction _____________
A/C ___________ Elect. Amps ________ Garage _____ Year Built _______
Roof ____________________________________________________________
Exterior __________________________________________________________
Interior __________________________________________________________
Kitchen __________________________________________________________
Baths ___________________________________________________________
Plumbing ________________________________________________________
Appliances _______________________________________________________
Neighborhood ____________________________________________________
Other Work Needed ________________________________________________

1st Lien Bal. $_________ 2nd lien Bal. $_________ In Foreclosure: __Yes/__No
Asking Price $_________ My Offer $_________ Resell Approx. $__________
Terms: __ Subject To, __ Agr. For Deed, __ Seller Fin., __ Lease Option, __ All Cash
Additional Notes __________________________________________________

Name Date Note
_________________________ _____________ ____________________
_________________________ _____________ ____________________
_________________________ _____________ ____________________
_________________________ _____________ ____________________
_________________________ _____________ ____________________
_________________________ _____________ ____________________


Here are some questions to ask ANY home seller.


The following is a list of sample questions you should ask a seller. When talking to a seller, try to ask the questions through the course of a conversation and try not to sound like you are reading from a list.

(Note: You will not ask all of these questions depending on the answers the seller gives and your investing objectives.)

Asking About The Seller And Their Property:

• Can you tell me a little bit about your home? (# of bedrooms, baths, size etc.)
• What do you like most about the home?
• What do you like the least?
• Are there any repairs needed?
• What is your sales price and how did you arrive at it?
• What do you think your house would appraise for in excellent condition?
• What do you think your property could rent for?
• Is your property listed with a real estate agent?
• If you don’t mind me asking, why are you selling?

Asking About The Existing Financing:

• Do you own the house free and clear?
• Do you know if your mortgage loan assumable? (low probability)
• Would you sell the house for what you owe?
• If not, how much are you looking to get above what you owe? (Subtract that from sales price to get loan balance.)
• How much are the monthly payment on the mortgage?
• Are the payments current?

What Kind Of Deal Can You Get:

• If I paid you all cash and closed quickly, what is the least you could take?
(Follow-up by asking if that is truly the least they would take.)
• Will you consider leasing the property to me with an option to buy if I guarantee the mortgage
payments and maintenance?
• Do you have a problem with someone living in the property until I get it sold?
• Would you consider optioning the property to me, if there is absolutely no risk or cost to you?

@Tyler Silver  , keep in mind that you need to look at any project as though you were going to put your own personal funds into, even when you're planning to wholesale it. As a wholesaler it's your job to get a "great deal" under contract. You'll notice that property has often been on the market for a long time and investors have passed on it exactly because it not yet a "great deal".

Of course, when the seller is truly motivated, the property moves quickly. Remember, often, the longer a property sits on the market that more motivated the seller becomes. At some point it stops being a "good deal" and becomes a "great deal". Persistence, my friend, wins! Don't settle for a "good deal", rather find the seller's pain, amplify it and offer to resolve it.

While you're keep your finger on the pulse of one motivated seller, go find another then another and another. Lather, rinse and repeat. Often you can push a seller a bit by letting him know that you have other more motivated sellers you're working with. They sometimes worry that they might lose their motivated buyer (you) and they take action.

Finally, never stop looking for YOUR motivated buyers. Talk to your cash buyers. Take them to lunch. Find out what they want to buy, then go find it. Sometimes you can talk up an opportunity that seems a bit marginal to you, but your buyer says that its just what he's been waiting for. Keep this in mind when evaluating a deal, the difference to a wholesaler between a "good deal" and a "great deal" is what his CASH BUYER thinks of it..

All the best.

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