Question on "Subject To" Deals. (long) - Posted by Bill K. - FL

Posted by JohnWe (NoCA) on February 15, 2000 at 20:40:38:

That’s right.

The deed gets recorded, not the trust agreement.

Question on “Subject To” Deals. (long) - Posted by Bill K. - FL

Posted by Bill K. - FL on February 15, 2000 at 09:01:38:

I have tried to help many on this site. Now I am asking for help. I have never actually done a true “subject to” deal mainly because, like many, I was brainwashed by the DOS fears. As a credit to this site, I no longer have that fear.
Thanks. Let me run a few thoughts by the pros and see what you think.

First of all, I would be happy with just a quit claim deed signed by all holders of title. I would verify mtg status by looking at their current statements and have a title company run a lien/title search. I would not be giving the sellers much cash, in any deal, to minimize my risk. I would take title in a land trust which would then be recorded. I would then L/O the house out re-cooping my investment plus some, and make a monthly spread on the rent payments. Since most people in my area can’t get a loan, it seems, or don’t want to,(bad credit/no money or both) I would be planning on a long holding period possibly several years or longer until someone could cash me out. In the meantime, I would be happy getting option extension fees and increased rent payments. I really wouldn’t care if they got a loan or not. I’m tired of fighting that battle.

I have three concerns.

  1. Getting the new payment book/monthly statements.
  2. Handling the insurance.
  3. What have I failed to consider?

Thanks everyone in advance. Please, I’m looking for input from those who have “walked the walk” not just “talked the talk”.

Let’s discuss subject to - Posted by Bud Branstetter

Posted by Bud Branstetter on February 15, 2000 at 21:12:51:

The whole point of negotiating subject to is to get the deed where you control. If the people are motivated enough to let you have the deed then there is not a need to screw it up. If they won’t go for giving you the deed(they may want more cash) because they still want control, that’s when you do a sandwich lease. If you have the deed there is not a reason to do a l/o. You can do a wrap via a contract for the beneficial interest. The time to consider selling on a L/O when you have a deed is when you have an inferior buyer or an inferior property. If you have the deed and can pass on non-qualifying loans that is preferred. There are many people willing to pay more down for a deed than for a L/o. If you are fortunate to have gotten equity you can put in a balloon that they have to refi or get you the cash any way they want for the equity.

There are some philosophies about never wanting a L/O to actually buy. That would be a reason to sell as L/O.

Re: Question on “Subject To” Deals. (long) - Posted by JohnWe (NoCA)

Posted by JohnWe (NoCA) on February 15, 2000 at 13:07:08:

That wasn’t very long!

Your right on with your strategy. Just a minor observation. You mentioned recording your land trust? You don’t record a land trust. A land trust is just a title holding instrument. So, about your concerns…

  1. Getting the new payment book – it’s best to do this in 2 steps. First, before you setup the trust, tell the seller to inform the lender that he will be putting his property into a trust. This is just to give them a head’s up. Second, when you create the trust, you or somebody or something that can be controlled by you (a buddy, your corporation, etc.) should be the trustee. At that time, have the seller inform the bank to transfer all documents regarding his loan to the new trustee. The bank shouldn’t have a problem with this.

  2. Handling the insurance – Tell the insurance company to transfer the loss payee to the trustee. The bank will get a copy, but it shouldn’t bother them based on what you setup in step 1. They’ll probably think the seller is doing some estate planning or something.

  3. What have you failed to consider – Be careful about leasing for several years. Could be recategorized as an ILC. Also, consider wraps in your strategy (instead of L/O, sell on an ILC, owner carry).

Bronchick’s stuff on L/O’s and Wraps is excellent if you don’t mind spending a few bucks.

Good Luck!

Re: Let’s discuss subject to - Posted by Bill K.- FL

Posted by Bill K.- FL on February 15, 2000 at 22:45:55:

I appreciate your help Bud. The point is in my market I work the bread and butter houses. I am familiar with the neighborhoods and have been working them for enough years. Lately, it seems most folks in this price range can’t or won’t qualify for a loan period. But everyone wants to rent! Go figure. Plus there are few rentals available probably for the same reason. So my thinking is, instead of trying to swim upstream, so to speak, rent them the house but under a L/O. Most of these people are lucky to have $3K if that. And most have the usual credit problems. (If I hear about one more person whose credit got screwed up because of a divorce I’m going to pull my hair out. LOL)I’m tired of trying to find the needle in the haystack buyer with enough $ and/or decent credit. And when I do find one of them that house had better be perfect and suit them to a tee, because they can buy any house in their price range and they know it. So why bother? I’m taking the path of least resistence in my area. And if I’m happy,the sellers are happy, and the tenant/buyers are happy, that’s all that matters. I know these are not get rich quick deals in themselves but doing a number of them could be lucrative. Another reason I like to sell with L/O is that should they ever stop paying an eviction is much simpler, cheaper, and quicker than a foreclosure.

Re: Question on “Subject To” Deals. (long) - Posted by Wilton

Posted by Wilton on February 15, 2000 at 18:50:22:

On a land trust, I thought that you DO FILE a trustees deed (This transfers ownership from seller to Trustee)
but the LAND TRUST AGREEMENT (naming benificiary) was held in your file, never being made public. If this is not correct, please advise.