Subject To - Equity and Seller motivation

[Doug Davis]

I've been watching YouTube videos, reading, listening to podcasts.   A couple of investors said that it was important that homeowners had a certain amount of equity before they make an offer using the subject to finance method.  I didn't really understand why as long as the loan was not underwater and they didn't explain it.  Why would equity be important when acquiring a house via subject-to?

Also, if I am a homeowner, I can't think of the benefit of selling "sub to".  I would think that the bank is still going to hold me responsible for the mortgage and that the mortgage would still count against my debt to income ratio, making it more difficult to get another house.  Is there any advantage to selling  sub to?  Or is it just that people want to get rid of the house so bad they take whatever option is available.

[Minna Reid]

I've never even heard of a due on sale clause being called in 17 years in the business. 

However, I have seen just a single deal in that same time, where a subject to could have benefited the seller. In that sale, the sellers were elderly, sick, uncollectible, and a hefty upfront payment in exchange for a sub 2 would have actually benefited them more than an outright sale (long story). A default on the mortgage later would have been an acceptable risk in their position and worth the lump sum upfront. 

That's one deal in thousands I have witnessed. I have never had a single other opportunity to recommend a sub 2, and probably never will again . They are almost never worth the risk to the seller.