This is the second part of the two part series on "Buying Real Estate by Subject To".
Finding a owner who will sell by "subject to" is not as hard as it seems.
They are some of the same distressed owners that you will find to be a motivated seller.
Most cannot keep making the payments, and welcome the relief.
Reasons vary, some need to move, some desire to rent, two homes, divorce, foreclosure, poor health,etc.
You use the same criteria and numbers in determining a good deal as with any other financing.
Just because it is a "subject to" deal does not mean you can buy a bad deal.
After you determine the numbers work, and the seller is interested...
1.
Fill out with the seller the PURCHASE AND SALE AGREEMENT use the information the seller tells you.
There should be a clause(s) for you to do due diligence.
2.
Get an authorization to RELEASE INFORMATION TO A THIRD PARTY, use this authorization to talk to the sellers lender, to order the payoff amount, and to find out if there are delinquent payments.
3.
Now investigate for tax liens or other liens, market value, title search, recheck figures, determine repairs, and the cost of repairs.
If you are qualified, do this yourself, but bring in the experts if you need.
Most of us need expert opinions in some areas.
This is DUE DILIGENCE.
4.
Determine if your research gives the same information as the seller.
a.
continue preparing the deal b.
amend the agreement c.
reach a new agreement d.
void the agreement because of information you have found.
5.
WARRANTY DEED TO TRUSTEE puts the property into a trust.
The property owns the trust and the Beneficiaries own the Trust.
6.
TRUST AGREEMENT this offers the benefits stated in #5, and gives some protection for the "subject to" transaction.
7.
LETTER OF AGREEMENT AND ADDENDUM: reiterates the understanding reached between the Sellers and you and becomes a part of the file for the property.
8.
MORTGAGE CHANGE LETTER: advises the mortgage company the property has been put into a trust, and the name of the trustee, and that the checks will be coming from the trustee.
9.
INSURANCE CHANGE LETTER: The same purpose as the mortgage change letter, but to the insurance carrier/agent.
10.
LIMITED POWER OF ATTORNEY: The document allows you or your company to sign on behalf of the seller in matters of insurance payoff requests escrow account.
11.
SELLER DISCLOSURE LETTER: Confirms there were no extenuating circumstances surrounding the agreement to sell the property.
12.
GET COPIES OF: or originals in some cases, mortgage coupon book, (or info for online payments), copies of original Deed & Mortgage, current Insurance Policy, Survey, & Title Insurance Policy, Appraisal, Alarm Codes, and Garage Door Openers, Keys When doing a "subject to" transaction, be genuine and explain the transaction thoroughly.
You are solving their problem.
Do not make any promises you can not keep.
In doing "subject to" the biggest potential for risk is: a.
you make a bad deal b.
tenant/buyer problems (do not pay and/or trashes property) c.
interference from sellers after the fact: if the seller shows potential for this type of problem, do not do the deal d.
due on sale: the risk is there, but slight.
Here is a list of previous articles, I have written on my Real Estate Investor Girl, that you may be interested in.
Buying Real Estate Subject To Do People Give Houses Away? The Smart Investors Advantage-Owner Financing