Originally posted by @Brian Gibbons:
That's like I want to learn ice hockey, lol!
Hey @Chaz Reid
What's SME ?
Here is a mini lesson on subject to
Subject to means get the deed or subject to existing financing
You buy the house subject to the existing financing
It's on the HUD 1 what loans are being taken subject to the existing financing
The business model is cash or terms
Low equity deals like 95% loan to value deals are commonly use subject to or lease-option assignment or wraparound mortgage purchases
I generally talk to sellers are not agents
The closing question is,
Mr. Mrs. seller I know you could pay the cost to sell with an agent but you probably have to pay to get rid of the house, as the cost to sell about 10% to 12% of the value of the house
You could rent it out
But here's a question I want you consider
What if I can get you a payment that would pay your P ITI for 24 months, someone would move into your house take care of it, at the end of the 24 months your house price would be whatever you are we can some mortgage or the ending balance, I don't even know if I can get my business partner to agree to it but if I could get those 24 payments paid on time, and you kept the loan in your name for 24 months just assuming the payments, with that be something you'd even consider or maybe not?
Hi Brian!
I hope you're still around 😊.
Question about your question to seller. You said 'at the end of 24 months your house would be whatever you are we can some mortgage'... can you please explain what you are saying? With 95% LTV there's barely any equity right? So at the end of the 24 months, do you offer to just pay off the remaining mortgage (meaning the seller doesn't make any profit) with a refinance from your new homeowner, or is there a balloon amount agreed on at the beginning of the 24 months (and seller pays anything in excess due to taxes or ARM, etc)? Trying to understand what you said 😊.
Thank you in advance,
Erin
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Ok Erin, thanks for catching that vague statement...
Original....
Subject to means get the deed or subject to existing financing (you get on the deed by promising to make the payments.)
You buy the house "subject to the existing financing" (there is no due on sale clause jail, that if the bank found out you got the deed and were making payments, they MIGHT call the loan, they do not HAVE to call the loan, due on sale clause a.k.a. alienation clause in the mortgage)
It's on the HUD 1 what loans are being taken subject to the existing financing; HUD 1 statement is the closing statement at the escrow closing. See
https://www.hud.gov/sites/documents/1.PDF
The business model is cash or terms (I like to give the seller a low cash offer and 2 terms offers, like cash plus 2 of sub2 - land trust, lease option, contract for deed-land contract, etc.)
Low equity deals like 95% loan to value deals are commonly use subject to or lease-option assignment or wraparound mortgage purchases (no equity, must do a terms deal)
I generally talk to sellers are not agents. Sellers will ok a terms deal for cash flow rescue, especially a vacant house with a mortgage payment).
The closing question is,
Mr. Mrs. seller , I know you could pay the cost to sell with an agent but you probably have to pay to get rid of the house, as the costs to sell about 10% to 12% of the value of the house
You could rent it out
But here's a question I want you consider
What if I can get you a payment that would pay your PITI for 24 months, someone would move into your house take care of it, at the end of the 24 months your house price would be whatever you are, if it appreciated or not, what ever your ending mortgage balance is would be paid off.
I don't even know if I can get my business partner to agree to it but IF I could get those 24 monthly payments paid on time, and you kept the loan in your name for 24 months, I'd just assuming the payments, would that be something you'd even consider or maybe not?
So you would take over the payments, lease option to tenant buyer, and at the end the buyer would have the house and the sub2 seller would have the house mortgage paid off.
I did my first sub2 a long time ago, and i use sub2 mostly on fix and flips. I try not to have the sub2 deal for more than 6 months during the fix and flip.
