Sub2 Advice, you'll love this - Posted by Christian Beebe

Posted by Craig-SoMD on October 13, 2003 at 23:36:29:

If the note was created properly, then it may be possible to sell your note, but more than likely you will have to offer it at a discount from the face value in order to sell it.

Sub2 Advice, you’ll love this - Posted by Christian Beebe

Posted by Christian Beebe on August 27, 2003 at 20:17:06:

Okay, I spoke with a seller today and they will give me $19,000 to take over their loan which is at $189,000. The house has comps at $210,000 easily. They have to move into their new home and HAVE to show their lender that they aren’t paying two payments, so that is why they are so motivated. They are going to move into their new place in about month and a half and will pay the payments till they move in. Here’s where I need help. I know about 50% about Sub2’s and I really really need someone to send me some good documents and tell me the steps I need to take in order to get this done, ie title, insurance, lenders, etc

If you have the time, I really need to get these documents to them in a couple days.

Thanks a bunch in advance, Christian Beebe (Solutions Kid)

Just curious… - Posted by JT-IN

Posted by JT-IN on August 27, 2003 at 21:57:59:

You spoke with the Sellers today, and they will give you 19K to take over their loan… subj to… How did this transpire…? Did you tell them you needed the 19K to make the deal work…? If so, great job. If that isn’t how that came about, then how.

Reason being, when you have a house with 20K of equity, the rest of us would be arm-wrestling the Seller to the old worn out carpet, just to get them to walk, w/o demanding at least part of their 20K in equity, let alone them janding over an additional 20 to boot. It certainly sounds as if they are motivated Sellers, which is what we all look for.

Please provide a little more background as to how this all transpired, and possibly some more help will come your way…

BTW, Nice job so far… and if you can get this done with only understanding half of the subject to gig, you will be lethal when you have it all together.


PS. What is the condition of the re-sale market where you are located…? And where are you…?

Re: Sub2 Advice, you’ll love this - Posted by JohnBoy

Posted by JohnBoy on August 27, 2003 at 20:40:26:

My question is this? You say you know about 50% about subject 2. Do the sellers UNDERSTAND what this is? Do they UNDERSTAND that you will NOT be paying off their loan where they will remain liable for the loan? Do they think they are paying you $19k to take over their loan with the assumption that you will be paying it off or assuming the loan, where they will no longer be liable to the lender???

More importantly, does their lender they are getting the new loan from know about this? Will that lender accept a subject 2 deal where they can only show they have deeded the property over to you subject to their existing mortgage where they are still responsible for the loan if you were to fail to make the payments?

Based on your post, it sounds like the seller thinks you will be paying their loan off or you will be formally assuming their loan, where they will no longer be responsible for that loan. In exchange they are willing to pay you $19k to do this. Are you SURE this is not what the seller is thinking? Does the seller fully understand that no matter what happens, they remain responsible and liable to the lender for this loan no matter what, whether you pay or not? Do they KNOW and UNDERSTAND this? Somehow I get the feeling they don’t fully understand this. Will their new lender be OK with this and fund their new loan under this type of agreement?

You need to make sure everyone fully understands this so it doesn’t create a big problem later. I assume they are getting a new loan for the new house through a different lender…correct? If this is the same lender then I doubt this would ever fly.

What is your understanding of a subject 2 deal?

Re: Just curious… - Posted by Christian Beebe

Posted by Christian Beebe on August 28, 2003 at 08:56:57:

They called me to help them out with their home. I was planning on a doing a lease option but on the way to meet them, I thought of a better way to help them out, subject to. I had just spent a couple nights reading up on this and I had a good understanding, evidently enough to be dangerous (sorry JohnBoy) and I thought to myself, “how in the world are they going to pay the difference between what they want and what they owe?” So when I got there, I asked them. When I found that they would pay the difference, I told them their options, which was either pay it to us and we would take over the mortgage payments or pay it when someone comes along, etc. Then I thought…why in the world would they not be able to make two mortgage payments, and then I realized by listening that they had to show their lender that they didn’t have two payments and even if they could pay for it, they technically couldn’t afford too, since their lender wouldn’t approve. And since I know that I could provide documentation to their lenders, I could help them out.

Technically they were going to sell me the property for 40k in equity with a lease option, which is still a possiblity if they don’t want to do the subject 2. They just needed help and I luckily was there, at least that’s how I look at it. Of course, nothing is finalized which is why I really need to learn very quickly and have someone help me out, if possible.

JT, I live in Southwest Ohio and the re-sale market is pretty darn good…better be :wink: Hope that helps some.

$19K - $1K for RE lawyer = $18K. O.K.? -NTXT - Posted by Brent_IL

Posted by Brent_IL on August 27, 2003 at 21:44:57:


Re: Sub2 Advice, you’ll love this - Posted by Christian Beebe

Posted by Christian Beebe on August 27, 2003 at 20:53:22:

That’s the other 50%. Actually they realize they will still be liable and that the other will be fine as long as it is shown that this loan is taken care of.

And honestly, I hate when people do what you do. They make a big deal out of something and pretend they understand the scenario when they don’t, and for what. I don’t get it. I have no problems if you ask and try to clarify things, but when you immediately come at me and make up in your mind that I don’t know what I’m doing, and assume that you know what’s going one, etc. WHEN I already said I am missing a 50% of the knowledge. You make as ass out of yourself, so don’t, because I’m sure you’re better than that.

Guess I will have to clarify everything I don’t know I need to clarify.

Is there anyone else out there that will help someone who obviously needs some guidance without jumping down their throats?


Re: $19K - $1K for RE lawyer = $18K. O.K.? -NTXT - Posted by JohnBoy

Posted by JohnBoy on August 27, 2003 at 22:01:05:

Maybe. Depends on the lawyer. How versed are they in subject 2 deals? That is the hard part, finding one that is. And if you only know half about the subject yourself, then how do you educate the attorney enough so they get things right?

If he can get referred to a good attorney in his area by another investor doing a lot of subject 2 deals, then that will probably be enough to proceed with. But he needs to ask and post what state and city he is in before anyone could help with that.

Re: Sub2 Advice, you’ll love this - Posted by Kristine-CA

Posted by Kristine-CA on August 27, 2003 at 22:01:04:

Christian Beebe: JohnBoy isn’t making an ass of himself. Be careful about flaming those with more experience and who know more. All he said was ARE YOU SURE? Your original post indicated that perhaps you weren’t sure about much (or at least about 50%–and one can’t tell which 50% you don’t know). JohnBoy has lots of info. And he doesn’t post often these days. Tread lightly. Almost everyone here is here to help. Sincerely, Kristine

Re: Sub2 Advice, you’ll love this - Posted by JohnBoy

Posted by JohnBoy on August 27, 2003 at 21:46:17:

I was not jumping down your throat. I was trying to clarify things based on what you wrote. I wasn’t pretending anything. Just trying to find out more facts and clear things up. You admitted you only know about 50% of this subject. That leaves a lot of stuff you don’t know. What all that is I don’t know based on what you posted. And if you don’t know 50%, then how do you know that isn’t really closer to 80%? If you don’t know what you don’t know, then how can you place a percentage on what it is you don’t even know? I was only trying to help you. Not knowing half or more about something can easily land you into a lot of trouble. But since you don’t want to be helped enough to clarify things better so someone can help you, then go ahead and learn the hard way. I can tell you that is not going to be much fun! I can also tell you that just asking for someone to send you documents to use is not going to be enough help that you need. There is a lot more to it than that. Every state has different laws and no matter where you get documents from, they will need to be modified to conform with the laws in your state. Not to mention you need to know how to properly fill them out, what they are for, when and how to use them properly, etc, etc.

What you need is to get a good course on the subject that fully explains everything you need and the has the forms you need and explains when and how to use them, what they are for, how to fill them out, and then have a qualified attorney look them over to make sure they conform with the laws in your state.

This is not a subject to jump into when only knowing half of what you need to know about something. That IS a big deal! And it’s going to be an even bigger deal if you don’t do things right from the beginning.

I would start by getting Bill Bronchick’s material on this subject and give some serious thought to considering on getting a partner that does know 100% about this subject and doing the deal with them so you can learn what you need to know. Outside of that NO ONE can help you enough to do this deal properly, unless they are going to personally take you buy the hand and do it for you step by step. This is where the partnering idea comes in. At this point that is about the best help I or anyone else is going to be able to give you without putting you at a high risk of getting screwed! So do it your way and learn the hard way if this is not what you want to hear.

Just do a search on this site in the archives about this subject. There are some good horror stories of subject 2 deals going bad that have been posted here over the years. You need a lot more help than just someone sending you documents to use. No one in their right mind would do it either. This may not be what you want to hear, but it’s the facts…like it or not!

Re: Sub2 Advice, you’ll love this - Posted by Craig-SoMD

Posted by Craig-SoMD on August 27, 2003 at 21:10:19:

There are lots of courses out there that explain things fully. That is the best way to go.

Once you have a good purchase agreement and appropriate addendums concerning a subject-2 transaction, then the other documents I use in this type of transaction, in this order, are:
Memorandum of Agreement
Agreement and Declaration of Trust
Warranty Deed To Trustee
Assignment of Beneficial Interest in Trust
Limited Power of Attorney(for each party)
Letter to each of the lenders(informing them of trust and trustee)
Letter to Insurance Company(same)
Sometimes a new Promissory Note and Deed of Trust securing the sellers interest in the property(if they have any reservations or want to be able to secure a new loan on a house)

You really need to know how to do this stuff or you are going to get screwed!!!


Thanks, JohnBoy -NTXT - Posted by Brent_IL

Posted by Brent_IL on August 28, 2003 at 08:48:04:


Re: Sub2 Advice, you’ll love this - Posted by Brent_IL

Posted by Brent_IL on August 29, 2003 at 12:30:14:

I’m always curious about the whys. Is burnout from this kind of thing the reason why you don’t post as frequently as you once did?

Good response - Posted by mattc

Posted by mattc on August 28, 2003 at 15:51:08:

John Boy - I like your response.

Christian - I think his idea for you to partner with a
"Sub 2 expert" on the deal is best. Then you could
split the deal somehow.

My opinion only - and I wish you both success.
Try sites:
rementors and sub2deals for more info - and possible
help also.
Search the CREO archives for Sub2 - lots of info here


New Promissory Note & DOT? - Posted by Gary

Posted by Gary on August 29, 2003 at 17:26:35:

Your next to last sentence peaked my interest for all things I don’t know. How does a note and deed of trust securing the seller’s interest allow him to secure a new loan? Does that lender look at this as an asset or that someone else is obviously making payments?


Re: New Promissory Note & DOT? - Posted by Craig-SoMD

Posted by Craig-SoMD on August 29, 2003 at 19:15:28:

Well, if on paper you are receiving the payments on a mortgage you hold, then that is viewed as income that offsets the expense of the mortgage you are paying. This is actually better than if you turn a property into a rental, which you are only credited at 75 percent. In reality, I will be making the payments directly to the bank. On paper, it will appear that I am making payments to them and they are making payments to the bank. A new lender will then treat that as a wash!!


Re: New Promissory Note & DOT? - Posted by satwant singh

Posted by satwant singh on October 13, 2003 at 23:31:01:

i want to cash my promisesory note