Subject to & Seller Financing

[Tyler Watson]

My goal is to invest in small multifamily properties using creative financing.

I am open to any mentorship regarding deal structures, network building, team building, construction management, and property management.

I am from Arizona so my market is very hot, but I have interest in San Antonio, Salt Lake City, and Raleigh. Once I choose a market I will be committed to that one, so please any insights on these 4 markets involving any of the topics I listed above would be greatly appreciated!

[Wale Lawal]

@Tyler Watson

”Subject To”:Your Best Seller Financing Real Estate Option
Before I get ahead of myself, it’s worth noting that the following seller financing option falls under different naming conventions in different states. What someone may know in California as a “subject to” could be known as something different just one state over. That said, I highly recommend checking with a trusted legal advisor, accountant, and title company before you set out to acquire seller financing real estate options.

The most well known, seller financing real estate option made available to buyers is known colloquially as the “subject to,” meaning the terms of the loan are subject to the seller’s existing mortgage. Otherwise known as “getting the deed,” “subject to seller” financing real estate options are probably the most well known, but far from general knowledge. And since so few people actually know the ins and outs of a “subject to,” it’s in your best interest to familiarize yourself with them. At the very least, it’ll give you one more option to choose from when the time comes to finance a property.

Typically, the seller will offer the buyer a Grant or Quitclaim Deed in exchange for some type of consideration (i.e. money, a note, or other assets). In exchange, the buyer is expected to put down “earnest money,” which isn’t usually a large sum of money; it’s just a gesture to show your interest. In exchange, the borrower essentially takes over the payments of the existing mortgage. What’s more, the seller will maintain the loan liability until all obligations have been met. The original terms of the note will stay the same, including the name on the loan it was originated for.

I want to make it abundantly clear; you are not assuming the loan. The terms you decide on are strictly between you and the seller, so long as they comply with the terms that were set forth in the original loan.

In the event you decide to pursue a “subject to” seller financing real estate option, make sure the title is free and clear of any discrepancies. Hire a title officer to be certain that the home in question is void of liens against the property and that could cause problems down the road. Only once you are certain that there is nothing that could stall the sales process, or even call into question the real owner of the property, can I recommend moving forward with a “subject to.”

Seller financing real estate options aren’t as well known as traditional financing options, but they are nonetheless an option. In fact, there are times when “subject to” financing options just make more sense for everyone involved. So long as everyone agrees to the terms, you may find that seller financing is the best way to go to acquire your next deal. Of course, mind due diligence and make certain that it’s your best option, but don’t simply ignore it; you could find it to be extremely beneficial.

All the best!