OfflineBuying “Subject To.”
Buying “Subject to’ is when a property buyer finances the purchase directly through the person or entity selling it. This often occurs when the prospective buyer cannot obtain funding through a conventional mortgage lender, or is unwilling to pay the prevailing market interest rates. The seller may agree to owner financing if he or she is having difficulty selling the property.
A "subject to" real estate deal is where a person buys a home "subject to" the existing loan. For example if a seller has a home for sale priced at $100,000 and there mortgage is $98,000, you can buy the home "subject to" the existing loan of $98,000.
Owner financing may only cover part of the purchase price, with a smaller bank loan or a seller take-back making up the difference.
This is also known as "creative financing" or "seller financing".
Owner financing is common in a buyer's market. In order to protect his or her own interests, the seller may or may not require a higher down payment than a mortgage lender would. In some cases the down payments of 20% or more are not uncommon in owner financing. The deed to the property is usually not transferred to the buyer until all of the payments have been made unless you are working with a highly motivated seller and the sellers credit is in question. Because no institutional lenders are involved, the overall terms of financing are much more negotiable, and can be set up to provide benefits to both the seller and the buyer. The buyer saves on points and closing costs, while the seller can obtain monthly cash flows that provide a better return than fixed-income investments.
You can buy homes without having to have a good credit rating. Using one simple technique called "subject to" you can buy a home without using your credit and without having to get a loan.
How do you find sellers who will sell "subject to"? First you need to find sellers who need to sell their home fast. This could be because of divorce, a death in the family or some financial hardship. Or, you can ask a real estate agent for expired listings or listings that are several months old. These sellers are usually itching to sell.
Once you find a seller who is desperate to sell you will need to explain what a "subject to" deal is. Basically you need to explain to the seller that you will pay their mortgage payment. It’s a good idea to work with an attorney, title or escrow company that is familiar with the subject to transaction. If you want to buy real estate using other people's credit then learn how to master the "subject to" real estate transaction.
If you would like the chance to work with me or one of my fellow real estate investor coaches and our advanced training programs, give us a call anytime to see if Dean's Real Estate Success Academy and our customized curriculum is a fit for you. Call us at 1-877-219-1474 ext. 125
I think the 'subject to' is a beautiful thing! I can't wait to apply it in my rei. Thank you for the great information as usual!!
Psalms 118:23 "This is the LORD's doing; it is marvelous in our eyes."
I just want to make SURE everyone knows the DIFFERENCE between "buying subject to" and "assuming the existing loan" because THIER IS a DIFFERENCE:
"buying subject to"- All the buyer is really doing is taking over the existing loan payments WITHOUT being personally liable for re-payment of the PROMISSORY NOTE.
"assuming existing loan"- when a buyer assumes an existing mortgage, they sign an ASSUMPTION AGREEMENT with the lender makes them legally responsible for re-payment of the loan. CLASS DISMISSED.
YOUR HERO, SULLY
Assuming a loan is really a thing of the past. Assumptions went out in the early 1980 when the lender decided to add the clause, Due on Sale. Meaning anytime the property changes ownership, the balance is due at that time. You can still find a few assumptions, maybe on VA loans, but for the most part, you will need to come up with your own financing.
If you would like the chance to work with me or one of my fellow real estate investor coaches and our advanced training programs, give us a call anytime to see if Dean's Real Estate Success Academy and our customized curriculum is a fit for you. Call us at 1-877-219-1474 ext. 125
thats NOT necessarily true, i have had some other investors in my area tell me about quite a few situations where they needed NOT to come up with thier own financing, they worked out a deal with the homeowner in pre-foreclosure, then called the lenders "loss mitigation dept.", of course after having the homeowner sign a "authorization of release form" and then negotiated to "ASSUME THE EXISTING FINANCING", now of course they had to convience the lender that they were credit worthy and had the money to "CURE THE DEFAULT", and bring the payments current, and this wasen't just on "VA LOANS", this happened pretty recently too, YOUR HERO, SULLY.
YOUR HERO, SULLY
Ok, I'm confused here, this sounds like a subject to, so what's the difference? From what I've heard, coach Jacobs is right, assumptions aren't being done now, it's subject to because of the due on sale clause.
Psalms 118:23 "This is the LORD's doing; it is marvelous in our eyes."
you CAN get around the "due on sale clause" by negotiating with the lenders "loss mitigation dept." o.k. i know this is confusing, so i'll try one more time, and by the way, NOT that it really matters pjacobs, cause your right to an extent, it was actually 1989 that "assuming loans went out sopposedly, however you can STILL "ASSUME A LOAN" with the consent of the lender, thats really all i'm saying, and YES they STILL will let you "ASSUME THE LOAN" especially with the way the market is now.
you see E, ever since 1989 lenders have put language in thier contracts stating that thier loans are "NON-ASSUMABLE MORTGAGES" and IF they tranfer the title to the property in the buyers name, this would activate the "DUE ON SALE CLAUSE" with means payment due NOW IN FULL. But, you can like i said in my previous post "ASSUME AN EXISTING LOAN" with the lenders consent. Oh, and about 70% will let you ASSUME THE LOAN and NOT call the loan due.
P.S. I know i sometimes come off as super contrvertial and thats NOT my intention, i just want the info to be correct as possible, with all due respect pjacobs, so please anybody forgive my wording if it seems a little ummm, direct
YOUR HERO, SULLY
Then why would you need to do a subject to if you can just assume the loan? Splain Lucy!! Because I'm tired and not gettin it... I'd better get some sleep and try again tomorrow... LOL! Night all!
Psalms 118:23 "This is the LORD's doing; it is marvelous in our eyes."
because....when you buy a property "SUBJECT TO" thiers STILL a chance that the bank can "call the loan", now this has not happened to a lot of investors, but it can, and the reason why the bank can do it is because the owner is "transfering title to you" which in turn violates the "due on sale clause". NOW, if you go ahead and "ASSUME THE LOAN"(with the banks permission, of course) you already have the banks permission to do so, and will not activate the "DUE ON SALE CLAUSE", so in turn, previous loans that were once "NON-ASSUMABLE LOANS" are now "ASSUMABLE" once you "CURE THE DEFAULT" and reinstate the loan, this CAN be done, it's all in the art of negotiation with the lenders
YOUR HERO, SULLY
The banks in Calif seem to be getting more open to creative solutions lately, probably because they are losing money big time. jrgnsn
jrgnsn
Sully's explanation of the "subject to" is right on the button.
Any clause in the note can be negotiated, and the term "get around the due on sale clause" need not mean something sneaky.
Anyone who flat out violates terms of the note needs to be prepared to face the consequences.
cactusbob
The difference is 'subject to' is taking over without the lender's approval and 'assume the loan' is with their approval, is that correct?
Psalms 118:23 "This is the LORD's doing; it is marvelous in our eyes."
Elena,
You hit the nail on the head!!! Got it down to one simple sentence.
cactusbob
All this mumbo jumbo makes it so confusing to those of us that are somewhat dyslexic. It would've been much easier to understand if that point was made from the start.. LOL! I appreciate all the information everyone, thank you!!
Psalms 118:23 "This is the LORD's doing; it is marvelous in our eyes."
confuse anyone, but instead clear up a post that was INCORRECT information, no disrespect to anyone at all, just trying to HELP, E, i guess maybe instead of trying to explain the whole history and all, i could have just broke it down, in a simple form, but hey, I wouldn't be SULLY then would I?
YOUR HERO, SULLY
confuse anyone, but instead clear up a post that was INCORRECT information, no disrespect to anyone at all, just trying to HELP, E, i guess maybe instead of trying to explain the whole history and all, i could have just broke it down, in a simple form, but hey, I wouldn't be SULLY then would I?
YOUR HERO, SULLY
You're such a crack up. I know you weren't trying to confuse me, I can manage to do that all by myself, without your help even!! LOL! I was tired and had a headache so it just wasn't sinkin in. By jove I've got it now! Thanks for all the help my good people, you ARE THE BEST!!!
Psalms 118:23 "This is the LORD's doing; it is marvelous in our eyes."
The most common way to transfer ownership in a Subject To is to use a Revocable Real Estate Trust. Trust by their very nature creates anonymity (no one knows who you are). In the trust the owner of the property is considered the beneficiary; you are set up as the trustee. Once ownership and all of the bills are in the name of the trust the beneficiary rights are transferred to you the "trustee". You are now the beneficiary and just have to appoint a new trustee. This is done without recording documents and you would use addendums to the trust documents.
For more anonymity you can have your LLC act as the beneficiary.
If you would like the chance to work with me or one of my fellow real estate investor coaches and our advanced training programs, give us a call anytime to see if Dean's Real Estate Success Academy and our customized curriculum is a fit for you. Call us at 1-877-219-1474 ext. 125