How Does A “Subject To” Deal Work

In my last article, I discussed how I was recently reviewing the Millionaire Real Estate Investor by Gary Keller of Keller Williams Realty fame and found a particularly interesting page where he was discussing how an investor bought a house by just agreeing to make payments on the existing financing. In the creative real estate investing circles, we refer to this as buying a house “subject to” the existing financing.

While there is almost infinite variation deal to deal, how does a typical “subject to” deal actually work?

First, you find a motivated seller. Not all sellers are in a situation where you making payments on their existing loan is an attractive option to them. However, as the record number of foreclosures tell us, there are lots of folks where having someone making payments on their loan is a good option since it would prevent a foreclosure.

Next, you write up a sales contract outlining the exact terms of how you will be buying the house, the price and other critically important details. Make sure you outline that you are not going to be getting a new loan and that you will be buying the house “subject to” the existing financing that is on the property.

Once you have a contract to purchase the house, you double check all your assumptions including everything the seller has told you. This is the time to do all your due diligence. Verify taxes, insurance and the payment. Read through and understand the loan documents so that you know about the loan you are agreeing to pay on. Consult with your dream team to get sound advice on anything you have questions about.

Once you are satisfied, close on the property and begin marketing it to get it sold or occupied. We will be discussing some of the more common strategies investors employ when moving properties that they purchase “subject to” in a future article.

Until my next post,

James

P.S. We cover “subject to” investing strategies in a variety of real estate investor courses including Subject To FAQs, Secret “Subject To” Tips and Tricks, Subject To For Lazy and Poor Folks and more for our Real Estate Investor Bronze Members.

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