Subject-To’s Are the Answer to Not Enough Buyers!
According to different stats you’ll find online, over 80% of the population can not qualify to get a loan in today’s market and because of the new Dodd-Frank regulations that go into effect in 2014, it’s only going to get worse!
This creates a bottleneck in the housing industry because if the majority of buyers can’t qualify for loans then that means many sellers can’t sell their homes. This is where Subject-To can help solve some problems for both sellers and buyers.
In talking to sellers and discussing their options, an investor who can buy their property Subject-To the existing lien is likely a better alternative then letting their home sit on the market for months on end while they are continuing to pay the mortgage. It’s also a better alternative then doing a short sale or foreclose because of the damage to the sellers credit as well as possible 1099’s or deficiency judgements for the banks loss.
For buyers, the lending environment has made nearly impossible to get a loan, especially if you’ve filled bankruptcy, or are dealing with other negative credit problems because of a divorce or other life situation. These buyers can benefit from being able to buy a home with financing already in place.
While Subject-To real estate transactions are not new, (we have been doing them for years), many investors are not familiar with this type of easy, almost risk-free investing.
The transaction I alluded to above really involves two different strategies. You want to do a Subject-To with the seller and then a wrap around mortgage with the buyer. (Certainly you could also evaluate a straight mortgage assignment but you can’t build passive income doing those types of deals.)
In this article, we are just going to focus on the Subject-To strategy which involves selling a house with the original financing kept in place. It is completely legal, and it’s a great first step to help motivated sellers and deserving buyers own a home.
There Are A Lot Benefits In Subject-To Deals
- The seller usually gets to sell the property at the asking price which was originally sought.
- Subject-To deals usually do not involve added expenses that are incurred by real estate agents and loan officers.
- When you choose to use creative financing methods, both parties stand to make more of a profit and, as a whole, it is also more cost-effective to the seller.
- You the investor usually get the property with little to no money down, while not having to qualify for any bank loans.
- On an average, the whole process usually takes less then a month depending on the situation. Many deals we’ve closed in less then a week. This is much faster then the 45-60+ days it takes to close a traditional sale these days.
- Subject-To Financing, or other creative methods, is usually based on working out an agreement that is fair for both the buyer and the seller without using banks or mortgage brokers. By incorporating this type of financing, the sellers can sell their property for the price they want, and in a timely fashion.
It’s integral that you know your numbers and how to appropriately evaluate a Subject-To deal. Even if it seems like an easy Subject-To deal, do your due diligence!
Subject-To Deals Typically Bought & Sold AS-IS!
Yes, it is true that Subject-To deals are typically bought and sold AS-IS which is a huge benefit to all parties if you really think about it. But there does come a time and place where you might want to spruce up a property in order to attract more buyers & sell the house faster with some ready to move in options.
Many buyers who buy properties with financing in place don’t mind that they have to do some work to the property. They are just thrilled to have a place to call home! But if you want to attract a lot of attention, get a higher asking price and sell FAST, then make sure your house is move-in ready.
Having a move-in ready house will not only attract the buyers who would have bought as-is but it will also attract the more picky buyers who if they see too many things that need to be changed or replaced, they quickly lose interest. If you want to attract both sets of buyers, invest some time and money to get the place in good shape before putting it on the market.
An important tip to remember with any type of real estate investing is to make the most of your time, plan out your best strategies and stay focused on getting the desired outcome!
If you’d like to learn more about building passive income by buying and selling real estate for a profit with no money down using strategies like Subject-To and wrap around mortgages, then check out our very affordable REI Rockstars Back Stage Access Coaching Series for both new and seasoned investors!
If you prefer not to stay in the middle of transactions and simply want to sell your contracts for a quick fee, then you’ll want to learn more about how to do mortgage assignments and wholesaling, and we teach that in our coaching series as well! For under $100/mth, you’ll learn Four (4) No Money Down Real Estate Investing Strategies so that you can better evaluate the deals you come across in order to make maximum profit!