Questions about my Subject-To scenario

[Gabriel Z.]

Hello,

I have recently gotten a seller to sign an agreement to a subject-to deal. The loan amount is $220000, and the estimated Zillow price for the home is $600k. However, the home is in quite poor condition and disrepair and will require a lot of work to get to this value. This seller was previously in default, but that amount was cleared. However, they have now come back into default on their payment about 4 months and their mortgage will be up for foreclosure in about a week. The agreement was signed and the overall purchase price $225K. The pre-foreclosure status is to be cured before the end of escrow, whenever it happens. There is also an addendum that allows the seller to stay in the home as long as they need, provided they sign a lease agreement with us. We are also going to repair and clean the home at no cost to the seller if he is There is also an addendum that says they are also entitled to the profits (split with us) if the home is sold by us. 

My questions come from the situation that arose as we approached title and escrow to open an account for this agreement. The agent warned that the purchase price is much lower than the estimated value of the home, so the county may not allow this type of title transfer. The agent also mentioned that there is also the question of foul play that may come up, such as a scam.  

Has anyone ever encountered this situation with a subject-to deal? 

What can be done to make sure that I do right by the seller and make this is a legit deal? 

Is there any way to reassure the county/escrow of this situation? 

Is this purely a numbers situation where I may just need to increase the purchase price?

If so, by what method would I do so? Bring more cash to closing, addendum that specifies how much the seller would receive should the property be sold, etc.

Any insight on this situation would be greatly appreciated. Thank you.

[Don Konipol]

Quote from @Travis Timmons:

It may not look exactly like you want it to, but don't let this one go without profiting from finding this deal. Remember that pigs get fed and hogs get slaughtered.

Whether it is a wholesale deal, finders fee, JV deal with a partner, etc., find a way to make money on this one and don't lose a good deal bc you're chasing a home run...whatever it ends up looking like, you found a great deal. Make sure you make money on it, and don't get too greedy.

Yup it does look like a great deal.  It just has to be structured so that it doesn’t end in disaster!