Need help structuring subject-to deal! (long) - Posted by Carey_PA

Posted by Jim IL on February 27, 2001 at 01:26:34:

Two ways.
Either tell the buyer upfront that the septic needs whatever it does, and that they are responsible for it.
Get enough money from the buyer upfront and have the work done by the seller (Carey in this case), but pay for that work from the buyers upfront money.

To cover it in the agreement for the first way, simply write in the agreement that the buyer has x number of days after signing to get the septic tank redone, and the seller will credit the buyer $xx.xx at closing for such repairs, but that the funds used to do this cannot count against payments, or be returned to buyer should they fail to exercise, or if they default.

That should do the trick.

Happy investing,
Jim IL

Need help structuring subject-to deal! (long) - Posted by Carey_PA

Posted by Carey_PA on February 26, 2001 at 20:03:28:

First of all, I’d like to ask anyone that is able and willing to walk me through this via telephone to send me a private email with your number and the best time to reach you, I will obviously use my dime!

Here are the details:
House is 23yrs. old.
4bd, 2ba. in a very nice neighborhood.
House is in great shape!

Comps come in around $148k (from my research on the web, I just contacted my realtor and asked him to run some comps for me too)

This couple moved to Florida for work and because they like the weather better. They don’t really want to make 2 mortgage payments anymore. BTW, they did a search on-line for “we buy houses” and that’s how they found my name and email address. (THANK YOU STEVE COOK)

They had the home listed by a realtor for $135k (They bought the place in '94 for $138,975)
They had an offer for $125k within 3 days of the listing which they did ACCEPT. However, there was a test done on the septic system and the test showed the system was marginal and they should replace the system. The listing realtor wanted them to replace the system, but they didn’t want to, so they offered to pay 50% of the cost to the buyer. In the end, the buyer walked and they are left with their house.

Mortgage Balance: approx. $110k
Mort. Type: 30 yr. fixed conventional (around 8 or 9%)
Mort. Payment: $1,390/ monthly
Taxes: ?? still waiting for info.

First I made sure that she understood that I would NOT be living in the home. She assured me that she understood that and she knows that I’m going to buy it and then resell it for a profit :slight_smile: So, I asked her what are you looking to get out of the house? She told me that she knows the price that she listed with the realtor and the price that they accepted were too much for me because I buy to resell and make a profit, so they really just DEFINITELY need to have those mortgage payments taken care of. She also agreed to possible barter, slightly, and build me a website. (that’s what her and her husband do for a living.

Anyway, I’ve never done a subject-to deal before and hopefully they will accept it, but I need to know how to structure it first. The wife and her mother are on the deed. I’d like to make an offer ASAP and hopefully get the wife and mother to deed me the place by wednesday, because the wife is leaving for Florida on Thursday morning.

Please help, thanks,


Re: Need help structuring subject-to deal! (long) - Posted by Bob

Posted by Bob on February 27, 2001 at 13:33:31:

Hi Carey,
If you can use some real estate advice, or if you could use some financing help, please feel free to contact me. I am a hard money lender in Pennsylvania, and I work only with real estate investors. My loans are for 100% of the sale price of the property (no down payment), and I turn loans around in two weeks. For additional information, please check out my website: , or call me at (610)667-9939. Thanks! Bob

Re: Need help structuring subject-to deal! (long) - Posted by Jim IL

Posted by Jim IL on February 26, 2001 at 20:46:39:

I’d find out more about the septic system issue first.
What does “Marginal” mean?
Replacement or repair, what will it cost?
I’d surely go for the deed, if the numbers you have are correct.
Then, if you can afford to fix the septic and market while holding this home a little while, do that.
Market like a madman and get a buyer in there, having them pay for the septic tank repairs from there upfront money.

As far as structuring, have the seller deed the home into a trust, and then assign the beneficial interest to you in that trust.
Have them sign a purchase and sale agreement RIGHT AWAY that states this clearly, and get the other docs if you can as well.
But, if for some reason they cannot or will not sign all the docs, at least get the agreement signed.
I’d make sure there was a clause in the agreement that states the deed will not be recorded and the deal not complete until you have satisfied your due diligence on the home as well.
This way of something unexpected pops up, you can just trash the deed and let them know the deal is dead.

Good luck to you,
Jim IL

Re: Need help structuring subject-to deal! (long) - Posted by Tom

Posted by Tom on February 27, 2001 at 01:18:50:

Jim, how would you write this in the contract, that their up front money would be used to fix the septic. Also, would this not be money out of Careys pocket? I’m new so I’m just trying to understand this. Thanks Tom