Subject to' this a deal? - Posted by ken in sc

Posted by JohnBoy on July 31, 2001 at 18:52:31:

You would have to have the deed the seller signs being held in escrow left blank as far as who the person is that will be taking title. If you use a trust where the seller would be assigning the beneficial interest over then the assignment form naming who the new beneficiary will be will need to be left blank until you know who the new buyer is.

You will have to talk with your attorney on this and see if that is something he would do while holding everything in escrow. Otherwise see what he would suggest to avoid the deed or beneficial interest passing to you first and then you passing it on to your buyer.

The typical way of handling this would be to just enter into a purchase agreement with you being the buyer naming yourself and/or assigns, then find the buyer and just assign your purchase agreement to your buyer and your buyer would close on everything from that point on. Then the seller would sign off on the deed and any other documents at that time. Title would never be in your name, only the purchase agreement.

Subject to’ers…is this a deal? - Posted by ken in sc

Posted by ken in sc on July 31, 2001 at 07:32:40:

I have not bought many subject to type deals, and the ones I have had plenty of equity so if I needed to refi it would have been easy.

This deal is as follows. Elderly lady lives in the house, is going to move to apartment. Owes $80,000, the house is worth $80,000 to $85,000 in good condition. It needs a little work now, so basically no real equity. She would sign a deed today. Does not care about equity, profit or her credit. But if I can sell it or somehow stop a foreclosure that would be great. Her payments are current at this time and she will make the August payment, but after that she will be in the apartment and will never pay on that loan again.

Like I said, she would sign a deed (or anything else for that matter) today. She trusts me because I bought her neighbors house and they said I was honest - which I am! But her neighbors had equity. I paid them low $60’s for basically the same house.

So, is there any way here to make a deal? I have some thoughts but want so suggestions and ideas.


Ken Holmes

Re: Subject to’ers…is this a deal? - Posted by Earnest

Posted by Earnest on August 01, 2001 at 06:13:38:

I know I would not do this one because its so thin. Lotta headaches for very little, if any, profit. I think if your doing this one it’s because your doing a favor for the Lil’ ol’ lady.

Then again, I would not have the reserves right now to carry me if there were a problem or two. Sounds like JohnBoy may be able to do it; perhaps he has the cash reserve to carry him.

Re: Subject to’ers…is this a deal? - Posted by JohnBoy

Posted by JohnBoy on July 31, 2001 at 08:06:48:

What is her interest rate on her loan? What are her payments, principal & interest, taxes & insurance?

How old is her loan? What are the terms of her loan?

What could you sell the house for offering it with Seller Financing?

How much could you expect to get from your buyer as a down payment?

Re: Subject to’ers…is this a deal? - Posted by ken in sc

Posted by ken in sc on July 31, 2001 at 09:11:20:

JohnBoy, thanks for the reply.

Her interest rate is 9 percent. She just refied all her equity out about 2 years ago. Her payment PITI is about $800. I don’t have her paperwork yet but I would imagine P&I to be $710 of that. Rent would be about $800-$850 - but the place needs some cosmetics and the roof while not leaking is getting pretty old. I sold the one next door (in good condition) for $84,900 on a ls/op with $2,000 down and $875/mo. The purchaser who happened to be a contractor also put a new roof on for a $1,000 credit. This neighborhood is about 20 yrs old and the houses are needing roofs!

What do you think?

Re: Subject to’ers…is this a deal? - Posted by JohnBoy

Posted by JohnBoy on July 31, 2001 at 09:34:40:

Do you think you could get that purchaser of the other property to put a new roof on this house for a credit against his house???

If she borrowed $80k at 9% her P&I would be around $644.

If you owner financed carrying $80k at 11% your buyers P&I to you would be $762 leaving you with $118 cash flow.

If you owner financed for two years, your seller’s loan would be about 4 years old with a balance of about $77,486.36.

Your buyers loan balance after two years would have a balance of about $79,238.08, leaving you with a small back end of about $1,751.72

This is assuming you were able to sell at $85k getting $5k down up front. Then minus any repair costs you end up out of that.

You might see what you can work out with your other buyer who’s the contractor about taking care of the roof for getting more credit on his home. Then just tie this up subject to you finding a suitable tenant. Then market it for a month and see what you can get out of this before making a final commitment on the deal. She said she’s going to basically walk away anyway, so it shouldn’t be a problem getting her to let you try and market it first to find someone to put in there.

Re: Subject to’ers…is this a deal? - Posted by ken in sc

Posted by ken in sc on July 31, 2001 at 12:33:48:

That’s what I told her I wanted to do. Try and sell it before I record anything. Then, if I can sell it for $85000 with owner financing I make a small monthly spread and a quick front end. If I cannot sell, then I do not record. Is that basically the program?

The difference in her payment and what we compute is probably PMI, so my monthly spread would be minimal. What about just letting the new buyers make the payments directly to the lender, and deeding them the property after my quick front end? In other words, just sell to them “subject to”, take some quick cash (and maybe give some to the lady) and moving on. It seems like a lot of work to stay in this deal for a few years when all the money is up front.

What do you think?


Re: Subject to’ers…is this a deal? - Posted by JohnBoy

Posted by JohnBoy on July 31, 2001 at 13:34:15:

You could do that, but be sure you get the seller’s approval of your buyers and make SURE you get a signed release of liability from the seller releaving you from any further responsibilty. Otherewise you are still responsible for your contract if your buyers were to ever default!

Make sure your contract states the deal is subject to you finding someone first. You should probably get all the paper work signed off and then have your attorney hold everything in escrow until you’re ready to commit after finding your buyer. Once a deed is signed and delivered it is considered transfered even though it hasn’t been recorded yet. Having all the docs including the deed held in an escrow account should avoid any problems.

A final question - Posted by ken in sc

Posted by ken in sc on July 31, 2001 at 15:04:34:

I guess my final question is…Is this what you do? In other words, would you do a deal this thin? If this deal was in your town, would you go for it? I know there does not seem to be much to lose, but after reading the long threads below between HR, Bill and others on potential liability, I am wondering if I am chasing a $4000 profit and incurring some liability. That is why I initially posted the question to subject to pros as: Is this a deal?

My typical deal involves buying at 80% of market value and selling ls/op so I don’t really have much experience in this arena.

Thanks for all your help, JohnBoy.


Re: A final question - Posted by JohnBoy

Posted by JohnBoy on July 31, 2001 at 15:12:41:

I don’t have a problem with taking over a loan that is 100% financed against a property as long as the deal can create enough profit in it with a decent up front amount and a good cash flow.

This one is skinny and I would look to do as you were thinking and find a buyer I could assign it to. In and out with a quick profit and be done with it!

Well, maybe one more… - Posted by ken in sc

Posted by ken in sc on July 31, 2001 at 16:18:40:

When you said find a buyer to “assign it to” did you mean that I can avoid going into title? That would be great.