Anatomy of a Subject-To Purchase

I am frequently asked how to put together a sub2 deal, so I put together this “play by play”.

 When I purchase subject to, this is how it usually goes………..

1. Seller calls me from one of my lead generators. I prequalify them pretty heavily on the phone. They usually have a good idea of what I will propose before I set up an appointment to go out and see them. By this I mean that I have at least introduced them to the idea of me simply taking over payments on their property. I have a “close” estimate of what “they say” is owed on the property. By “they say” I mean that more times than not, I find that there is more to the story than they tell me up front. Not always, but most of the time.

2. I go out to meet with them. I look at the house to see if it “qualifies”. We sign the sales agreement and we are off to the races. If they don’t know the exact amount owed on the loan, that’s ok. I will just put “Approximately $XX, XXX” in the space where it says “Loan balances taken subject to”. They should have an old payment coupon around that will give you the balance, if not, no problem. Since I also have them sign an “Authorization To Release Information” on their loan, I can call and get the balance.

3. Once I have the property tied up, I can check and verify all the info they have given me. Loan balances, liens, clear title, and any inspections I choose to do. Since it is locked up I can take my time with the due diligence and things can progress along at my pace usually.

4. After I am satisfied that all the info is accurate or at least that there is a real deal here, we are ready to close. I have done a few of these so I just print off the trust docs myself and we go anywhere that there is a notary to sign off on them or I can bring my friend who just happens to be a notary.

5. Once the docs are signed, all you have to do is go file the deed at the courthouse and the property is yours.

There are a few other details like getting the insurance squared away and so forth that will have to be addressed later, but at this point the house is yours.

This is how I do it. I am sure that there are as many ways to get it done as there are investors doing it. You CAN use an attorney if you like. It might be a good idea for your first one or two.