Buying “Subject To.”
Buying “Subject to’ is when a property buyer finances the purchase directly through the person or entity selling it. This often occurs when the prospective buyer cannot obtain funding through a conventional mortgage lender, or is unwilling to pay the prevailing market interest rates. The seller may agree to owner financing if he or she is having difficulty selling the property.
A "subject to" real estate deal is where a person buys a home "subject to" the existing loan. For example if a seller has a home for sale priced at $100,000 and there mortgage is $98,000, you can buy the home "subject to" the existing loan of $98,000.
Owner financing may only cover part of the purchase price, with a smaller bank loan or a seller take-back making up the difference.
This is also known as "creative financing" or "seller financing".
Owner financing is common in a buyer's market. In order to protect his or her own interests, the seller may or may not require a higher down payment than a mortgage lender would. In some cases the down payments of 20% or more are not uncommon in owner financing. The deed to the property is usually not transferred to the buyer until all of the payments have been made unless you are working with a highly motivated seller and the sellers credit is in question. Because no institutional lenders are involved, the overall terms of financing are much more negotiable, and can be set up to provide benefits to both the seller and the buyer. The buyer saves on points and closing costs, while the seller can obtain monthly cash flows that provide a better return than fixed-income investments.
You can buy homes without having to have a good credit rating. Using one simple technique called "subject to" you can buy a home without using your credit and without having to get a loan.
How do you find sellers who will sell "subject to"? First you need to find sellers who need to sell their home fast. This could be because of divorce, a death in the family or some financial hardship. Or, you can ask a real estate agent for expired listings or listings that are several months old. These sellers are usually itching to sell.
Once you find a seller who is desperate to sell you will need to explain what a "subject to" deal is. Basically you need to explain to the seller that you will pay their mortgage payment. It’s a good idea to work with an attorney, title or escrow company that is familiar with the subject to transaction. If you want to buy real estate using other people's credit then learn how to master the "subject to" real estate transaction.
If you would like the chance to work with me or one of my fellow real estate investor coaches and our advanced training programs, give us a call anytime to see if Dean's Real Estate Success Academy and our customized curriculum is a fit for you. Call us at 1-877-219-1474 ext. 125