Structuring Subject-to Deals
Member since 2023 · 1 post · 0 votes
Hi everyone, newbie investor and new to the community. I have been reading a lot about creative finance and I have some questions specifically related to subject-to deals.
I understand the big picture - seller for one reason or another needs to get out of their mortgage payments and so we can step in and take over those payments for them.
I need help with the finer details.
What else does the seller (or should the seller) get out of this kind of deal? For example - let's say the seller has no equity and would owe money if they sold the property and they are no longer able to make payments. They are facing foreclosure. I could step in, take over their payments, and what then? They just walk away from the house? No money for them? Wipe their hands clean and now it's all mine? Do they not usually get some kind of down payment, compensation, or something else out of the deal? I actually think if they are in a bad situation then this would be good enough for them, but I want to know what else sellers generally get out of a subject-to deal other than just being able to hand the payments over to someone else. Should they cover closing costs, or the buyer? Do we, as the buyer, offer to cover their moving costs? etc. etc.
What about a situation where maybe they have some equity in the house,
but for one reason or another they cannot make payments and they don't
want to go through the process of working with an agent to list the
property and try to sell the house? Could subject-to work for this as
well?
What about the paperwork, then? We may not be working with agents and so how does the paperwork get done? As I said, I understand the concept, but putting this kind of contract into the language of the law is above my capabilities. Do title companies step in here and make sure everything is legitimate and legal? Do they have attorneys at these title companies to oversee the transaction and make sure both parties understand the contract? Or should I bring my own attorney every time?
I know - long post, lots of questions, sorry in advance but I really appreciate any feedback/input or advice regarding this!
I understand the big picture - seller for one reason or another needs to get out of their mortgage payments and so we can step in and take over those payments for them.
I need help with the finer details.
What else does the seller (or should the seller) get out of this kind of deal? For example - let's say the seller has no equity and would owe money if they sold the property and they are no longer able to make payments. They are facing foreclosure. I could step in, take over their payments, and what then? They just walk away from the house? No money for them? Wipe their hands clean and now it's all mine? Do they not usually get some kind of down payment, compensation, or something else out of the deal? I actually think if they are in a bad situation then this would be good enough for them, but I want to know what else sellers generally get out of a subject-to deal other than just being able to hand the payments over to someone else. Should they cover closing costs, or the buyer? Do we, as the buyer, offer to cover their moving costs? etc. etc.
What about a situation where maybe they have some equity in the house,
but for one reason or another they cannot make payments and they don't
want to go through the process of working with an agent to list the
property and try to sell the house? Could subject-to work for this as
well?
What about the paperwork, then? We may not be working with agents and so how does the paperwork get done? As I said, I understand the concept, but putting this kind of contract into the language of the law is above my capabilities. Do title companies step in here and make sure everything is legitimate and legal? Do they have attorneys at these title companies to oversee the transaction and make sure both parties understand the contract? Or should I bring my own attorney every time?
I know - long post, lots of questions, sorry in advance but I really appreciate any feedback/input or advice regarding this!