Buying PreForeclosures “Subject To” Without Using Your Own Money
By: Justin Lee
There are many ways and methods in which you can fund a PreForeclosure property purchase: pay all cash (yours or a hard money lender’s), find a credit partner, use conventional financing (a mortgage), or my personal favorite, reinstate the loan and buy it “subject to.”
Purchasing property “subject to” the existing financing is a great way to acquire any property, not just PreForeclosures. By purchasing the property “subject to the existing financing” we are not getting a new loan, but rather having the seller transfer title to us (or into a land trust), and we take over the payments for them, and begin making payments directly to the existing lender. This allows us to control a lot of real estate, without ever having to sign for a new loan against our personal credit.
If you’re going to buy a PreForeclosure property using this technique, most deals will be fairly common: first of all, the homeowner is going to owe the lender back payments. Let’s look at a case study of a home I recently purchased when contacted by a seller who wanted to stop foreclosure on his home.
The seller owed a total of $208kon a home worth $260k. He had PITI (Principal, Interest, Tax and Insurance) payments of $1500/month and was 4 payments behind. After late fees, penalties, and attorney’s fees (the property had already gone into foreclosure status) the reinstate figure was $7,000. The seller also had 9 months left on a prepayment penalty, which would have cost him 6 months of interest (approximately $7,000) if he had sold the property and had the loan paid off.
"THE ARCHITECT OF YOUR DESTINY IS YOURSELF"
"SUCCESS WALKS HAND IN HAND WITH FAILURE"