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11-01-2008, 09:15 AM #1
Renter
- Join Date
- Oct 2008
- Posts
- 6
Sub 2 deals?
Does anyone know how sub 2 deals work? I've heard that they can be good investments but i never fully understood the process..
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11-01-2008, 04:56 PM #2
Mansion
- Join Date
- Nov 2006
- Posts
- 1,232
You find a property where the owner needs to sell or goes foreclosure. He might even be late in his mortgage payment.
You negociate the purchase by giving a down payment and assuming the existing mortgage for a quit claim deed.
I recently purchased a single family that way. The owners couldn't pay anymore for personal reasons and they wanted to list the property. While I couldn't guarantee to sell it quick, specially in this market, I explain the "subject to" process.
The fair market value of the property was about $185,000 and they owned $140,000. We were agreed that they will leave the closing table with no money, no deed anymore, but also no mortgage to pay.
So, I pay the late payment, about $5K and I'm paying the existing mortgage. I have the deed. The note remains to the past owner's name though but I'm the guy who pays it...
No banks fee to pay at closing for that purchase, that's a significant saving. And obviously, you don't need a credit history or high credit score.
So, roughly, I got the house for $145K. I'll wait a bit to refi even if these days, banks will accept a stranger's check instead of having the house foreclosed or even call the "due on sale" clause...
Also, if you want to do that several times and afraid of the due on sale clause, I use a "rental agreement" to avoid that clause. The rent? It's the mortgage!!
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