Are all of the Sub-To Scammers getting SCREWED with the new interest rates?

[James Wise]

How are things going in the slimy world of Sub-To investing these days?

I've heard that a lot of the Sub-To deals that the bank's have previously turned a blind eye to are having their Due On Sale Clauses enforced now that rates are remaining higher for the foreseeable future.

How ya'll keeping the grift going now that the buck is due?

[Don Konipol]

Quote from @James Wise:

How are things going in the slimy world of Sub-To investing these days?

I've heard that a lot of the Sub-To deals that the bank's have previously turned a blind eye to are having their Due On Sale Clauses enforced now that rates are remaining higher for the foreseeable future.

How ya'll keeping the grift going now that the buck is due?

James, I don’t quite understand why you think subject to is a scam?  There is absolutely nothing illegal, unethical, or immoral about utilizing a subject to strategy.  Sure, it can be abused, done incorrectly, or made to take advantage of the uninformed.  Just like medical, e commerce, or real estate brokerage.  

So let’s start with the basics.  There is nothing illegal about doing a subject to deal.  The “due on sale” clause does not, in fact , legally CAN NOT, prohibit a transfer of property where the mortgage lien is not paid off.  What it says is that the mortgagee has the option of accelerating the note, within compliance of state real property laws, if property is transferred. So, nothing illegal here.

How about unethical?  If two parties are fully informed beforehand about the risks of a transaction, and both wish to proceed given the risks, what is unethical about that?  Both parties are willing to complete a sale using subject to financing because they believe the benefits out way the risks.  The transfer of property is a matter of public record.  If the lender wishes to enforce their rights under the mortgage or deed of trust that’s their right.  Nothing unethical here.

How about immoral? Well, let’s say the note holder does accelerate the note as a result of the title transfer.  If both buyer and seller have prepared for this contingency, then the ultimate outcome shouldn’t be much of a problem. First, the lender will probably be willing to allow the buyer to qualify for the mortgage, at a somewhat higher interest rate.  Failing that the buyer should be able to refinance or should have enough cash to pay off the note.  Failing that the property can be deeded back to the original party, and the lending institution may be satisfied with that.  Worse case the property is sold to a third party and note paid off.

Can things go wrong - perhaps terribly wrong?  Sure, but they can go wrong in a new financing also, just look at 2008-9.  People lose property in foreclosure all the time.  What subject to invokes is entrepreneurial risk; the thing all real estate investors live with in an attempt to grow our assets, and gain a financial “free” lifestyle.  

Now, if you’re speaking about some gurus who promote subject to without safeguards to be used by people with no experience or financial ability to withstand a foreclosure action then I agree that it can be an irresponsible act.  However, I can’t condemn a method of financing that has proved successful in many of not most instances in allowing participants to accomplish their goals because it’s being misused by some disciples of irresponsible real estate “priests”