OfflineBuying PreForeclosures “Subject To” Without Using Your Own Money
By: Justin Lee
There are many ways and methods in which you can fund a PreForeclosure property purchase: pay all cash (yours or a hard money lender’s), find a credit partner, use conventional financing (a mortgage), or my personal favorite, reinstate the loan and buy it “subject to.”
Purchasing property “subject to” the existing financing is a great way to acquire any property, not just PreForeclosures. By purchasing the property “subject to the existing financing” we are not getting a new loan, but rather having the seller transfer title to us (or into a land trust), and we take over the payments for them, and begin making payments directly to the existing lender. This allows us to control a lot of real estate, without ever having to sign for a new loan against our personal credit.
If you’re going to buy a PreForeclosure property using this technique, most deals will be fairly common: first of all, the homeowner is going to owe the lender back payments. Let’s look at a case study of a home I recently purchased when contacted by a seller who wanted to stop foreclosure on his home.
The seller owed a total of $208kon a home worth $260k. He had PITI (Principal, Interest, Tax and Insurance) payments of $1500/month and was 4 payments behind. After late fees, penalties, and attorney’s fees (the property had already gone into foreclosure status) the reinstate figure was $7,000. The seller also had 9 months left on a prepayment penalty, which would have cost him 6 months of interest (approximately $7,000) if he had sold the property and had the loan paid off.
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Can someone elaborate how "Subject To" work on a preforeclosure deal?
Thank you in advance.
I agree if someone could elaborate a little more on this subject. The previous artictle just kind of stopped. If someone could state how this type of purchase benifits the buyer. I would love to use this type of option, but I need to know more. It seems like there was more to say but it just seemed to stop.
sistreet, you always have such great info to share.
yes, but we need more detail. thanx.
when buying preforeclosures you are dealing with the owner/but the banks have a claus of alienation of title.which means if the title change owners,they can call in the whole loan.But most won`t,so I been told,especially in this economy.You basically is giving the owner money for his equity,if he has any,if he doesn`t you can still pickup a decent property if it fits your objectives.The subject-to means your purchase is subject to the existing financing.But please read up on preforeclosures in dean`s think a lil different books,because there is much you need to know,like right of rescission/cancel period if any in ur state,and the true condition of the loan,because you may have to contact the bank to get a true picture of the condition of the loan.
Sissy you do a lot of good reading Lady!!!! that article reminded me that I had a foreclosure book somewhere that I was thrilled about when I first got it.Now I`m rereading it cover to cover as a refresher.
Just keep them coming lady
Sincere Wishes
grandpa
When you think you understand the process of pre-foreclosure and foreclosure, there is so much more to learn. It is always invigorating to read all this great new information. Thanks for posting.
Sandra
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Sistreat, I know this may sound silly but when you speak of the rienstate figure. This is the amount of money past due on the mortgage, correct. Is there any chance the bank will negotiate this amount to a lower figure ever. If you buy the property "Subject to" who is responsible to pay that figure, YOU or the Previous owner. The reason I ask is I am currently meeting with a family that is past due 7 or 8 payments and the lender has sent them a letter letting them know their options. Currently they are trying to sell the property fast for 150k they state it is worth 191k and they owe 124k so I want to have my ducks in a row when I make my offer. Any words of advice?
Would you want to do this if they owe more than the what the loan is? In this instance would a short sale be better?
Jason A
billhowardjr in your case there will be no subject-to.1st they owe 124k,you are payiing 150k,therefore the bank is paid what it is owed,the whole 124k out of the 150k,and the owners get`s the rest.
For your deal to be a subject-to,the bank would not get all it`s money,you would be taking over the loan and making the payments after bring the loan current,by paying the back payments and late fees.
I know someone who has their house up for short sale. They already moved and are renting it out. They paid 420k in 05. It is listed for 350k with short sale. But here is the catch. I spoke briefly with them to see if they are behind. They are not. So i think the realestate just listed it as quick sale to draw attention to it. It is a big house 4 beds 2 baths. Would i be able to take over the existing mortgage. they are motivated to get away from it.
Probably. But why would you want to. You would be buying a house worth LESS than 350K (it did NOT sell for 350K so all we know is that it is NOT worth 350K) for MUCH more than that.
I dont know what their loan balance is but in 3ish years they didnt pay down much.
Can some tell me how can i find Foreclose property? Are most of the foreclose properties occupied by somebody/owner?