Quote from @Ken M.:
Quote from @Steve K.:
Quote from @Ken M.:
Quote from @Steve K.:
The only issue I see is that there is no such thing as a house that won't sell on the MLS. Properties that need a lot of work sell on the MLS all the time, even tear downs. The highest price is always going to come from exposing the property to the maximum number of potential buyers. The way to do that is on the MLS. You admit this by saying that you always capture equity, but not too much equity. If you're capturing equity, that means the seller could make more by selling to someone else (on the MLS/ with an agent on the open market). You're walking a very fine line between doing good business and equity-skimming IMO because it's subjective. One persons correct amount of equity could be seen as equity skimming by someone else, like a seller or their heirs or a judge or a jury. There are so many other ways to make better money in this industry, with less risk and less ick. Sorry but it just seems like bottom feeding to me. Why not just get licensed and do business on the up and up?
That is very lazy thinking. A real estate agent makes $24,000 for listing a $400,000 house. And sits. Do you think that is value?
Well yeah, if the house gets sold and they make more money with much less risk than they would by selling subto and giving up that equity and wrecking their debt to income ratio and potentially their credit or having the loan called due, then obviously that's a better deal for the seller even if they have to pay an agent. Commissions are also negotiable, it doesn't always have to be $24k for a $400k sale. A lot of times I'm able to connect a buyer and seller in a situation like this and save them on the commission. Just because somebody talked to one agent who couldn't help them doesn't mean they are stuck needing to sell subto. They should talk to more agents and find the right one. Many agents will already know a cash buyer and can put the deal together for a discount because they won't have any listing expenses, they just make a few phone calls.
Your word "IF" is a very big word feller. "If the house gets sold". (by the agent)
I'm not sure what the current expireds list is, but it's a long list and for a reason. Since sellers aren't robots, they get a choice in this matter. What a seller "should do" isn't ours to decide.
It can be useful for a seller to use an investor to buy the property when:
1. The agent tries but can't "get it sold"
2. Agent over promises on price
2. There isn't enough equity for a seller to sell without bringing money to escrow, that they don't have.
3. Agent Doesn't return prospective buyers phone calls (oh, yeah, that does happen)
4.The beat up house that you list on the MLS doesn't qualify for lending from (FHA, VA etc reject it) New buyers can't get financing.
5. There is an offer but the appraisal comes in way low
6. The Seller can't stand real estate agents (there are reasons this is actually true) Nothing personal here Steve, it's just a fact of human nature
7. The seller needs money today for grandma's gout surgery
8. They lost insurance because of a bad roof and a buyer can't get insurance in it's present condition, No one will buy the property
9. It's a crack house . . . that had a fire . . . that the copper wires were stripped . . . and now squatters live there
10. It's near a cemetery and no one will buy it except the residents in the cemetery
11. There is a dispute on a lot line
12. There is a lien to deal with
13. The seller is in bankruptcy
14. It's a painful probate with 5 disagreeable heirs.
15. The seller is only days away from a foreclosure auction.
16. The seller or the seller's neighbor, take your pick, is an irritable butthead with a gun, that sane agents can't/won't deal with.
17. The property is in CA or CO or WA or NY or some other stupid communist Biden supporter place that has an eviction moratorium. But the investor is a masochist for pain so he will buy it anyway. Normal people don't buy non-paying properties with an eviction moratorium.
There are lots of reasons using an agent won't work. Using Subject To is not always the answer, it's one of a swiss knife of choices an experienced investor brings to the party.
The reason there is a long expired listing list is almost entirely because those seller's picked an unreasonable price and refused to do price drops until it sold.
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1. The agent tries but can't "get it sold" 1. Seller should try a different agent or adjust the list price
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2. Agent over promises on price "2. No agent wants to price a home too high and not sell it and get paid nothing. Why on earth would they do that? Makes no sense. It's always the seller insisting on an unreasonable list price in my experience, never the agent. Agent's typically like to list properties a little low so they get buyers attention and sell fast.
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2. There isn't enough equity for a seller to sell without bringing money to escrow, that they don't have."2 #2 (your list has two #2's, so mine does too). This contradicts your statement that you always get just enough equity to make it worthwhile, but not too much. If that's the case that there is just the right amount of equity, then it can be sold on the open market.
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3. Agent Doesn't return prospective buyers phone calls (oh, yeah, that does happen)" 3. I have never had an agent not call me back about a listing. Maybe it's you? If you mention sub to in the message, then it's definitely you.
"4.The beat up house that you list on the MLS doesn't qualify for lending from (FHA, VA etc reject it) New buyers can't get financing."4. FHA and VA are so rare these days. I haven't seen one in several years and Trump is probably getting rid of the FHA and the VA soon anyway. This is a non-issue for 99.999% of listings. Most fixer-upper sales are going to be sold to cash buyers anyway and everybody knows that.
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5. There is an offer but the appraisal comes in way low" 5. If the property doesn't appraise then there isn't equity at that sale price anyway so what would be the point of doing a sub to at that price? Doesn't make sense and contradicts your own statements. The buyer can come up with the appraisal gap, or negotiate the price.
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6. The Seller can't stand real estate agents (there are reasons this is actually true) Nothing personal here Steve, it's just a fact of human nature"6. If a seller prefers dealing with an "investor" making a sub to offer on their property over listing their property with an agent, then they both deserve each other ;). Nothing personal of course.
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7. The seller needs money today for grandma's gout surgery"7. There are almost always better options like a reverse mortgage (remember you said there is equity).
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8. They lost insurance because of a bad roof and a buyer can't get insurance in it's present condition, No one will buy the property" 8. What actually happens in this scenario is that the lender does what's called force-place insurance. You can't have a mortgage without insurance. My insurance broker has also never failed in finding insurance coverage. If you have a seller with this problem, send them my way I will help them.
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9. It's a crack house . . . that had a fire . . . that the copper wires were stripped . . . and now squatters live there"9. Sounds like a deal my investor clients would love to pay cash for and close quickly! Also sounds like they should make an insurance claim or ask their lender for mortgage forebearance. Selling to someone via subto would probably just make their situation much worse.
10-15. I would never recommend anyone to buy a place subject to an existing mortgage in any of these situations.
16. The seller or the seller's neighbor, take your pick, is an irritable butthead with a gun, that sane agents can't/won't deal with.16. Cool have fun with that!
"17. The property is in CA or CO or WA or NY or some other stupid communist Biden supporter place that has an eviction moratorium. But the investor is a masochist for pain so he will buy it anyway. Normal people don't buy non-paying properties with an eviction moratorium."
17. You did not think this one through. Trump actually signed the executive order that created the eviction moratorium, not Biden. It was nationwide not just the sates that you called out. Does that mean Trump is a "stupid communist" in your opinion?
You wrote a lot but missed my main question: Why would anyone want to specialize in subject to and actually seek out these kinds of deals? Or even crazier, why would anyone pay somebody for training in this tiny, kinda shady market segment, when there are so many other better ways to make money in this business? You could just get licensed for a fraction of the cost of any of these sub to trainings and help 9.9 out of 10 people instead of .01 out of 10. I can see how sub to makes sense in very rare circumstances especially short-term and combined with another strategy like flipping, but I don't understand why anyone would specialize in this or take the time to become an expert and operate exclusively in this space, or want to hold a property purchased using subto longterm. I guess if you have a criminal record and can't get a real estate license then this is an option, along with wholesaling. But I don't see why it would be anyone's first choice as a way to make money in real estate.
