4 Benefits of a Subject To Transaction for the Homeowner

Purchasing a property subject-to the existing financing remaining in place... is a popular strategy for the new investor as many times they can pick up a property without using any money or credit and sell for a profit.  There are many benefits to the homeowner as well, and being able to convey these benefits will help the new investor secure a real estate transaction.  The purpose of this blog is detail how a subject to transaction benefits the homeowners.

Sellers primarily benefit from a subject-to transaction in the following ways: 
1. Sale of their property without many of the fees inherent to the traditional sales process, such as Realtor fees and other closing costs. We will later see that this greatly benefits sellers that have thin equity positions where the net sale proceeds would give them “negative equity” by selling their home traditionally 

2. A lack of third party financing allows the investor to purchase the house very quickly so that they can leave their problem in the past 

3. For the sellers with missed payments and equity positions that make the purchase favorable to the investor a solid payment history helps to restore their  over the course of the first few years the investor owns the property 

4. The primary way the purchase benefits the seller is that it opens up the pool of buyers that cannot qualify for bank financing. This is especially important during the subprime aftermath where banks’ underwriting standard have become increasingly stringent to correct for years of loose and reckless lending practices. 

There are risks to subject to financing transactions, and it is strongly recommended that the new investor seek legal guidance on the required paperwork and risk adherence. But this strategy, if done correctly, can afford the new investor with a business that will allow upfront capital, monthly cash flow, and equity, which may outweigh several of the risks.