Subject 2 Questions-Will They Never End?
I did buy John's book and awaiting the arrival. In the meantime I caanot seem to stop compiling info.
When an investor does a sub -2 deal is that the same thing as assuming the loan?
Since most loans these days are not assumable how is this a successful market?
chantynicole,
I can tell you are excited about Sub to investing by the number of questions you are asking.
Congratulations on ordering the manual.
In the mean time while waiting for it to arrive (just a couple of days) you might want to read all the responses in the Sub to forum here as most of your questions will be answered in the manual and forum. This way when the manual arrives you will already have an understanding of how Subject to investing works.
In answer to your above question, no it is not the same as assuming a loan. You are correct about loans not being assumable.
Best of luck
John (LV)
you are subjecting yourself to the existing terms and conditions of the existing loan.
hey chantynicole
from my understanding is that when you go to buy a house sub-to the existing financing, you do not assume the loan under your name, you are deeded ownership of the house while keeping the loan in the sellers name.
This is successful for many reasons but here are a few.
-no out of pocket expenses besides the money you pay for your "consideration" for the house, which many pro's like $10.
-leaves many exit strategies to choose from
and many more i guess, i'm not a pro.
should the situation call for the owner to ask for more money up front, ask them if they need it right away, if not then can they take it back as a 2nd mortgage.
the way i see it, is the only time you can get paid on the deal, except on L/O, is when a new buyer, with new financing, comes to cash both you and the original seller out. its perfectly legal and i dont see how its illegal.
if joe has a car he has for sale for $500, and i want to buy to resell it. I find my buyer and say, "hey, heres a car i have for sale for $1000." Buyer says yes he'll take it, you collect money to pay off joe and you keep 500 for your earnings. SAME THING!
Is there an error in my logic??? i'd like to know. really i would, i'm jus as green as the grass... well grass thats alive of course.
[addsig]
Also, the beauty of doing a sub2 deal is if you put up $10 and turn around and do a lease option with a potential buyer and ask for an option consideration fee of 3-5% (on a $100,000 home) that would be $3,000 to $5,000 in your pocket - thats all yours for the keeping
If for some reason the deal does not work out due to liens on the property that are way out of your range all you've put up was $10.
Hope that helped~
Chanty
Just so you understand.
There is nothing inherently wrong with buying a property subject to the existing financing. It means that the old owners loan stays on the property with his name on it (assumption means your name is substituted).
The issue is that starting about 20 years ago all the lenders who resell their loans via FNMA etc have put terms into their loans that say that the loan is for a residing owner and that if he rents it or sells it, etc, then they have the right to call the loan.
There are two kinds of lenders - those who lend based on the property and those who loan based on the buyer. Most loans that you will come in contact are the kind that are based on qualifying the buyer, not the property - what is your FICO score, what is your salary, etc.
The whole idea is that the lender gives better terms based on being able to screen out people who they dont think will pay. But along with this they reserve the right to call the loan if the property changes status. If someone new comes along they want to go throught this screening all over. You might be willing to loan $20 to your brother but would be angry if he turned the debt over to his deadbeat friend.
Someone suggested it would be ok to buy subject to and then to enter into a resale based on a lease option. This is risky - risky risky, unless you are wealthy enough so that paying off a home loan is not a big deal.
What if the lender finds out and calls the loan and you dont have enough assets to pay off? What do you imagine the guy who had the llease option is going to do? In the end will it go to civil court or to criminal court? Either way you'll be sorry.
JayLevin,
Glad to meet you.
Having read your analogy of what happens in a Subject To deal, would you please back up your statements with a court case where this has happened.
You must know something that I don't know, as I have done a few Subject To deals, how many have you done that gives you this first hand knowledge of what can happen?
Please tell me that you are just not guessing but are actually giving advice here at TCI with some professional standing.
John $Cash$ Locke
John, I don't see anything wrong with what JayLevin has said. It is a risk. I do know on BLANK a woman stated she has a loan called by countrywide. She was making the payments. Here is the link.
All said and done it is a risk albeit a small risk. But if it does happen you can be taken to court regardless of what your paperwork states. You will have to defend it and then you will find out how good your paperwork is. That costs money.
When you buy right you have a lot of options that you can do if this does happen. Now if there is no equity then what will you do if they call the loan due? Not as many options as I can see and it may get ugly.
Oh, I am new to cre investing. I have been working at this for the past year full time. I am signing up a house worth 1.1 mill for 50 cents on the dollar. Not bad for a newbie.
Good Luck,
Tom
$-
Tom, sounds like you have a great deal going for you.
I deleted your reference to the other site, because I know if JP sees any mention of TCI the post is immediately deleted. I am only returning the favor.
Also remember sometimes posts like the one you referred to are plants by anti Sub 2 people, it would be like a mortgage broker posting interest rates are going up 5 points, so hurry and get that loan now.
John $Cash$ Locke
TCI Moderator
$-[ Edited by JohnLocke on Date 11/04/2003 ]
What if the lender finds out and calls the loan and you dont have enough assets to pay off? What do you imagine the guy who had the llease option is going to do? In the end will it go to civil court or to criminal court? Either way you'll be sorry.
Yes, the bank has the option to call the loan. I read the link , the post makes no sence to me. I gess County Wide likes to do harm to themselves. They must have far two many performing loans and not enough forclosures.
We own a home 1/2 equity @6%+- its been years since the payment check has had the owners name on it. The loan was sold off twice.
So let me get this straight.
County Wide doesn't like the performing loans so they "hire random auditors to search county records for land trusts"?? Instead of selling them in a portfolio they forclose"
What about some of the what if's.
What if the bank was after the equity?
I think banks are in the money busness not real estate. Meaning keep the loan performing.
With so much equity, stated income loans are not so hard to get.
What if interest rates are higher ?
Why does the bank want to forclose to get a higher rate when they most likely won't be getting the new loan?
What if the letter in that post is true the bank wants vengeance on performing loans? "We are tired of investors buying subject to." That statement makes so no sence I wouldn't believe my eyes if I read it myself.
Land trusts were not created for subject to investors. Like living wills they are means for people to protect thier property and identity. So I wonder how many land trusts are sub to deals vs legal advice for estate planning? 1 in 1000 maybe? Why would a bank search for estate planning?
Finally my buyers have full disclosure about the underlying loan that could be called at any time. Thats how I keep them paying timely.
I have never been to court but I'll keep you posted
While the events in the article Tom posted MAY have happened, I seriously doubt that it was anything like what was posted, if at all. There are simply too many inconsistencies with the story for any reasonable person to beleive. Besides the fact that it is a post written BY the person in question (which always seem to put themselves in a better light), it is still the same old, "I know someone, who knows someone who this happened to, and this is how it went." This is sort of an urban legend now.
For my views on this matter, and countrywide, read this link;
http://www.thecreativeinvestor.com/modules.php?op=modload&name=Forum&file=viewtopic&topic=15345&forum=34&start=15
Roger
chantynicole...
It can, it probably won't, it hardly ever does, so make a choice. <IMG SRC="images/forum/smilies/icon_wink.gif">
hope this helps,
clear2close
_________________
Assistant Vice President (Senior Loan Officer) / REI Millionaire Wanna Be / NoAdvertising(dot)com / RON LEGRAND COURSES[ Edited by jfmlv1950 on Date 11/04/2003 ]
Oh man, I can just feel the love going around on this post.
With EVERY investment you take a risk. When you buy any investment, you risk losing it for whatever reason. With sub to's it's the DOS, with stocks it's Enron.
You have options....many of them. I hate talking to people and telling them what I'm doing and hearing all the negative feedback about what can go wrong. Hardly do I hear about what can go right. Risk Risk Risk Risk Risk Risk. That's all I hear. Hell, there are risk you take when you market you buy houses....what if someone doesn't call........But what if they do.
"Keep doing what you've always done, and you'll keep to getting what you've always got." - I forget, I think it was Kiyosaki
[addsig]
I hope people didn't take my post wrong. I like the Sub To way of financing. I wouldn't want to deter anyone from learning and utilizing it as a form of their investing. I think that there will be risk in any type of investment that you do. Even the conventional way. You have to outweight the risk and minimize those risks to the best of your capabilities. Buying right will always minimize those risks.
John, I understand about the URL deletion. I have a couple of private money backers that will fund the 1.1 mil deal. I am trying to set up an appointment with a possible third private money guy this week.
Raj, I don't know what to make of the "title search" causing the loan being called. It could happen but I seems weird that they would pay people to check up on titles. I doubt that it would happen very frequently.
For the land trust question. The person that posted the link didn't say if she had the original trust docs signed by the seller. I doubt if she did have them. She could have shown the bank that the original sellers were still the owners. The bank cannot call the loan due if they just place it in the trust. Garn St Germain act prohibits it. So if you showed the bank the original trust docs naming the sellers as beneficiaries than that should have take care of the loan being called due. Now doing it this way will be more of an ethical call on your part.
Tom
Naw tbel, it's all love on TCI.
That's what makes these boards so much fun. It's good to have people disagree and raise questions, that's how we all learn. Congrats on your 1.1 mil, maybe you should write an article on how you did it. And if you do, don't forget who inspired you to write , and make sure you tell the people that a 1.1 mil deal is not that much different from a 100K deal, just a couple of more zeros.
keep em coming and keep stirring the pot.
If you do it right, ALL loans are assumable.
Could you please clarify in what your saying Hibby
The secret to selling houses on terms without risk that you've purchased on Sub 2 is to have a clause in your selling Lease-Option or Land Contract that identifies in advance your maximum exposure in the event of your default, as well as a remedy which you can easily tolerate.
For example, you can specify that your full and only liability to the optionee in the event of your default would be a return of the downpayment (and/or monthly downpayment installments), and that further the reimbursement of said damages would be through continued occupancy of the home without cost from the time that the optionee is notified of the default situation until such time as it is required to vacate the home by a judicial order. During this time of "cost-free" living, the full amount of every payment that comes due, but is unpaid, will be deducted from the total amount of damages. You must be sure to state additionally that an earlier abandonment than specified will not entitle optionee to a larger refund by virtue of the fewer months of free living.
You can word this any way you see fit, so long as ALL of the above points are covered. If you do this, you have effectively self-financed the repayment of all or the majority of your liability to the optionee, because in many states you can drag out an acceleration of mortgage (which would have to culminate in a full-out foreclosure) for many, many months, and in some cases up to a year or two.
Nick
P.S.- I'm not a newbie.
Actually, just 1 more zero...
You are so right it is the differences in our people that have made the U.S.A.
so great and that is why we are free to state our opinions here. So for my 2 cents worth.
If you can't afford to pay cash for property you must be creative, and for creative Real Estate investing the sub-to.
"Gets the Gold"
Quote:
On 2003-11-04 10:19, hibby76 wrote:
If you do it right, ALL loans are assumable.
Agreeing with Nebulousd... any elaboration on this statement would be greatly appreciated.