Subject To, Should I Do?
Greetings Ya'll, I am working with a fellow who wants to sell me his house subject to. He has about 10-15k equity and only $680 for 03 taxes due. I told him I really wanted to get the house for a little U-Haul money. He's appears to be calm and cool but from the conversations I've had I believe there's a high level of motivation to sell this month. He wants 3k and me to pay the taxes for the deed. How should I handle this fellow? I don't want to offend him.
If you really want to get this place and know it is a good deal, then calmly and firmly explain what you are willing to give him and tell him that he can have a couple of days to decide. I am just wondering from the info that you have given if he doesn't have alot of back payments that he owes also and what kind of profit potential you see the property?!?
The house appears to be in exceptionally good condition. The neighborhood rents for $650-$750. The payment is $539 and the balance is $52,300. I haven't contacted the lender yet, but so far I have no reason to doubt the seller's word. He knows I will be doing my due diligence. Houses are easy to rent in this neighborhood.
Offending him is not the issue here. IF it is, by all means pay him what he wants! (not!) Trustworthy as he seems, unless you've had previous dealings or have substantive reasons for trust, proceed with care. Does he want to sell "subject to" or do you want to buy "subject to?" If he knows the terminology, he may be a little more sophisticated than you think, and may be trying to outfox you.
Explain to him that you're sorry, but you're an investor, not a retail buyer, and though you can (presumably) quickly and painlessly help him avoid foreclosure, etc., you can only offer a price which makes sense to you in the context of your investing. Make your offer politely and stick by it.
On the other hand, it sounds like you're close to a deal. If you see a profit potential, it's not breaking the rules to give him a few grand if it makes him happy and if the deal still makes sense numbers-wise, (including '04 taxes, which are also relevant). If not, smile and move on. You've gotta fall in love with the deal, not the property or the seller.
Thanks for all the advice fellows. I am considering helping out a friend who needs a place to live. I will probably help him get the house, or maybe go in partners with him.
Let me get this straight, your going to pay this guy close to $3,500 for a house on a Sub-To deal?
This is a deal I would not even touch! There are far more better deals out there.
I only own 11 Sub-To houses but I have never paid the owner one penny (well except the $10 for the change of deed)
In fact on all my homes I get $150 closing fee (covers the notary and title search) and up to three months of payments while I searching for a Tenant/Buyer. If I find one the first month than no future payments will be made.
I did not use to charge the $150 but the more sellers I talked to the more I realized they expect to pay something
Rob Carroll
AHS
Hello Rob C.
If you don't mind me asking, what kind of marketing do you do that has the seller giving it to you, or even better paying you to take their property?
Inspirational post to a newbie.
Thanks in advance,
Marv
Rob, may i ask how long it has taken you to aquire eleven houses subject 2? thanks Jeb.
Marv,
, in fact I have many questions myself and am ording John's course at the end of the month.
If you check out my profile you can go to my web site and email me from there. I will be glad to answer any questions and help in any way but by no means am I am John Lock
Jeb,
Your awnser is I have been doing this for one year this month. And I must admit I have been very lazy!
Because I require up to 3 months payments maybe it has killed several deals for me. But I have never had to make a payment or pay somebody at that time.
Rob Carroll
Loon,
Well put! Fall in love with the deal, not the property.
Andersoninvestment,
One year & 11 props? Well done (golf clap... golf clap)!
Thanks :-D ,
OTW
andersoninvestment,
Sounds great! Congratulations! I have just about given up on getting folks to give me their house without me having to fork over any money for arrears, repairs, and u-haul money. Guess I'll need to try harder.
I'm just curious, how much equity are you getting on these deals(Not that it matters that much as long as you never come out of pocket)?
JohnCl
In my experience, if you are paying on a sub 2 deal then the seller is not highly motivated. Also, you have to gain the sellers trust in order for them to deal with you. I picked up a house this way two months ago worth 275k and only met the sellers once for 1/2 hour. Good luck.
I had a seller pay me 30k to take his houses sub2- the deals are out there- you just have to ask!
I usually make an offer of about 90-91% of what their asking, then I mark the the house up 1.10 to 1.15 over their asking price.
Example
$100,000 home
I offer $91,000
I lease to own it for $111,000
instant $20, 000 in equity
now I deduct their down payment and give them a rent credit each month that comes out of that equity if they purchase.
So, what you are saying is that none of these houses you are buying subto need any work (I guess you make them clean up the house after they move out?), the sellers aren't behind with the bank, and the sellers actually have cash sitting around to pay you to take over their house and make their payments for them even though they are still liable if you don't?
Sounds fishy. What exactly is the seller's motivaton?
JohnCl
Dont you guys just love doubter's like John.
Ye of little faith....JUST ASK!
In answer to your questions,
1. Do I do repairs: not often, and if I do any major repairs the seller pays for it, up front and I pay them back when my tenant/buyer cashes out. Example
In November I bought a lake home for $140,000. The seller only owned $100,000. The home appraised for $179,000.
(this was just two weeks ago)
I had the seller refinance the home before I took possession of it. That amount they did that for was $138,000 (boom $38,000 to the seller right then), out of that $38,000 they paid me 3 months payments = $3,300 and $4,000 for repairs that needed done. In return I signed two promissory notes 1. Saying I will pay back the $7,300 to them when my T/B cashes out, 2. One for the $2,000 left over from the difference between the $140,000 and $138,000
btw
this home has been sold and the final closing is this Thursday, I sold it for $171,000. Which means I will pay off the note of $138,000, pay the seller his amount of $7,300, pay half of closing $2,500 and walk away with around $22,000 not to bad?
2. Do I ask them to leave the home clean?
Thats up to them they have two choices. They can leave it clean or pay $125 at my closing for me to contract the job out. Same with carpets cleaned. Have them done or pay $125 at closing for me to have them done. Same with lawn, have it mowed or pay $40 at closing.
3. Behind with bank. To this day I have never bought a home that is behind in payments. Would I? You bet! but the seller would have to make a heck of a deal for me or agree to make up back payments over the next year.
4. Do I think people have cash sitting around to pay me to take their home. No,...but they still do if their motivated enough. I know its hard to maybe have to make three more house payments after they move. I bust my ass to get that home filled as soon as I can.
5. Motivation
Divorce, job transfer, moving out of state, laid off, downsizing, upsizing,
Main two are Debt and Time Relief.
Hope this answers your doubt's
Sorry so long but if your creative and treat people right this does work and it just takes you ONE time of doing people wrong to ruin you.
Rob Carroll
AHS
First of all, I'd like to thank Rob C. for returning my call today. and for the great tips from someone that's been there, and for answering all those questions, I asked how he does that? response, company policy. he is professional and gives a service that helps people. Be creative was his best advise.
Marv
I'm confused. What I'm hearing is that for sub-to deals, investors are able to take over the loan (or purchase the home) with absolutely no risk and are still able to get some money from the sellers for 3 months payments and title searche. Amazing, Congratulations.
I am working on my first sub-to deal and I am having to pay a finders fee and repairs costs to get the property ready for rent. If I follow the above train, then this is not a good dealk and I should walk away.
Maybe I need to do some more looking before I jump into this one.
JS.
The first time I read a sub2 course I was skeptical. I thought man, this is not an honest or moral way to acquire RE. But after much reading and after meeting with some of these folks who are distressed, I now see how sub2 can lighten the burdens of our fellow man while allowing investors to make an honest buck. I feel bad for the folks who are selling their houses to low life scum bags who can not or will not keep the loan in good standing. I have had some opportunities to do a sub2. But I am waiting for a deal I feel comfortable with. I will consider the seller's credit rating as my own.