does doing a "subject to" require a lot of money?

[Account Closed]

the whole process of a subject to. how much money do i need? does it cost a lot of money out of my own pocket?

is there a lot of risk in a "subject to"?

[Matt Devincenzo]

So I'm by no means an expert in these types of transactions, but will attempt to clear things up a little. A Sub2 and Lease Option are vastly different.

So first a lease option is a lease like any standard lease; "I rent property XX for $XX/mo" and an option; "I have the right to buy property XX for $XXX". Those are two separate documents a lease and an option to purchase. There will be terms such as how long both the lease and option are for. If you don't execute your option and the terms in it by the agreed date then your option to purchase goes away. If you do exercise it then you would close and take title to the property at that point. So with a LO you don't actually own the property you just have some contractual control over purchasing it at some point in the future.

A Sub2 you actually close on the property and take title in your name, meaning you are the owner of that property. However the mortgage that was originally on the property in the sellers name stays on the property and in their name. The only closing costs you will have will be those to close the transaction without any of the mortgage recording, down payment or underwriting costs. The risk is that there is a "due on sale clause" which says that basically the lender has the right but not the obligation to call the loan due in full. Meaning they can say because there was a title transfer they are owed their full loan amount and they can initiate the foreclosure process to recoup their loan balance. It is a risk and one you should absolutely be in a position to refinance the loan out should it be exercised.