Very Important Subject-to Scripts
Knowing the answer to these few sub-2 objections will either make you, or cost you tens of thousands of dollars. First, subject-to is the best way to buy property right now and if you're new to the business… a subject-to is when you buy someone’s house and take over their monthly payment. However, the loan remains in their name.
So, you are the owner of the property and are on the deed, but the loan is still in the name of John Doe Seller. This is the way that you can buy 20 houses a year, for no-money down because you're simply taking over a payment.
Of course, when you first pitch a subject-to... to a seller they always ask, "how come the loan has to remain in my name, how come you can't get your own loan?" Here's what you tell them: “If our company had to go out and get our own loan we would have very high financing costs and we would not be able to purchase the property at the price agreed upon. We would have to purchase the property at a big discount if our own loan was involvedâ€(Then you give them the low-ball cash offer number).
Since the majority of sub-2 people have very little equity in the property, they can't sell at a big discount and they now understand why we need to take over the payment and have the loan remain in their name.
Another question that very few investors know how to answer is, "what happens to the insurance on my house, if I let you take over my payments". The answer is that you will have the seller cancel their insurance policy and you will be required to get your own insurance on the place because you are the new owner. Also, you need to add the seller as an additional insured on the property since their name is still on the loan for the house. Adding someone as an additional insured should not cost you any money (my insurance company has never charged me a dime to do this).
Lastly, sellers want to know what guarantee they have, that you will make the payments on the house. That's when I point to the "special clause" my lawyer created in my subject-to contract which states if I ever become 30 days past due on a payment the house would automatically revert back to the seller... they love this clause and it makes them feel a lot safer when you buy the house from them.
There are many more scripts you need to know when buying a property sub-2, but these are some of the most common deal killers.
That''s good advice, but be careful not to bring it up at all unless the seller does, no use handing them a reason not to do business with you, I spin it a little more positively and say "you know, you already paid all the points and closing costs to get the loan in the first place, so doesn''t it make sense that I not have to pay them all over again?" If needed I go on to say that this is my business, and Mr/s. Seller, do you really believe I would invest all this time and trouble to buy your house just to flake on the payments and undermine my own business?
But honestly, I don''t get that objection much. Partly because I head it off by saying, "and the best part is that once I catch up your loan and start making the payments on time, there''s a big benefit to you that your credit scores will start to improve as a result, which we both know is a good thing."
I don''t get that objection when I am talking to a potential Sub To seller, because I don''t "pitch" it the way you do.
John (LV
Done properly with a scripted presentation, the investor will answer all "questions" before they become "objections" at least my presentation works that way.
Then during the presentation the seller will start selling me on purchasing their property, of course on my terms, not theirs.
Now, Jason that is how a presentation is suppose to work or ... when you buy a car do you sell the salesman on selling you the car you want, because it sounds like it from what you posted!
John $Cash$ Locke
I am new to this site and this forum, but have been investing for a number of years and done many Sub-to transactions.
I must agree with John. We should not have to "sell" the Seller on buying their house. Quite the opposite. Remember, in many cases they called us. There are thousands upon thousands of Sellers out there but only a handful of capable Buyers. Most Sellers I deal with are so motivated they will do practically anything. The most common questions I get are "Where do I sign?" and "How quickly can you do this?" However, full disclosure is of the utmost importance when dealing with this type of situation.
Regarding the homeowner''s insurance policy. In my opinion, cancelling the existing policy is asking for trouble and one sure fired way to alert the Lender of a title transfer. They may not necessarily call the loan, especially in this climate and considering the loan has been brought current and payments being made, but they can. Why take that chance? If nothing else, after receiving notice of the cancellation, the Lender will demand proof of insurance or force a policy on the property which is very expensive.
What I usually do is either leave the existing policy in place and have myself (or the Land Trust the property is deeded to) added as an additional insured, or just get a separate policy in my name and leave the existing one alone. I realize this means paying for two policies, but it''s a small price to pay for problem prevention.
My two cents.