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Subject To: Everything You Must Know!
Grant Teach Me Something – Grant Kemp, Ryan Harper – S2E13
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2:04 – If there was a recession-proof strategy it would be owner financing, of which the Subject To strategy is part. It could be the savior of your portfolio.
4:07 – The technical definition is purchasing a property “subject to” the underlying mortgage staying in place.
4:50 – It is important to tell the seller that you are making payments on their behalf. You are not taking over the mortgage. The homeowner’s name is still on the mortgage, they carry the liability and the mortgage will show up on their credit report.
6:51 – Subject To is an acquisition (purchasing) model not a disposition (selling) model.
9:15 – Correct legal documentation is critical, and you must disclose everything very clearly.
11:00 – Subject To is good for low Equity properties and allows you to pay more for the property than other investors. As the market shift comes, the cash buyers will be shut out because they can only buy at steep discounts.
15:20 – Essentially, subject to is and unlimited non-institutionalized non-recourse Lending.
22:00 – STANDARD SUBJECT TO PROCEDURE: Warranty Deed, Deed of Trust, Promissory Note, Deed to Secure Performance.
22:30 – in Texas a mortgage is two documents. 1) Deed of trust is a document stating that the bank can foreclose on a property if you do not pay the note. 2) Promissory note outlines the terms and payments of the loan.
24:26 – The trustee on the deed of trust is the actual attorney assigned to the Foreclosure. Before foreclosure, the bank will file an “Appointment of Substitute Trustee,” which is public information and a good place to get a pre-foreclosure list.
28:00 – Ultimately, if you can help someone stop a foreclosure, then do so. Daniel’s video – 12 Ways to Stop a Foreclosure – https://youtu.be/XpjPcQWti44
29:00. The standard subject to transaction goes as follows. The homeowner wants to sell but still owes bank money. The investor wants to take ownership, the homeowner gives the investor the warranty deed, the investor issues a Note and a Deed of Trust to Secure Performance (DTSP).
34:40 – Be educated on the subject to process so you can answer all of the homeowner’s questions before they ask.
36:50 – Lien position is critical and is based on the date that the lien is filed. Whichever lien position files a foreclosure has an obligation to pay any prior liens, but no obligation to pay any subsequent liens.
40:13 – The Cornerstone of negotiation is being transparent because most investors are telling sellers what they want to hear, not the truth.
45:30 – SELLER OBJECTION #1: Due on sale Clause states that the bank has the right to demand the payment of the remaining loan if the property is sold. The bank can demand full repayment on the date of the actual sale of the property.
48:43 – Getting the proper insurance for Subject To properties is critical. Grant details this in his video: Insurance on Owner Finance Deals – https://youtu.be/3cUUhN0mJC4
55:06 – SELLER OBJECTION #2: What if the seller wants to get a new loan in the future? You cannot tell them that they can definitely get a new loan, use the phrase historically speaking, our sellers have had no issue getting a new loan.
1:06:46 – THE RULE OF THUMB FOR PURCHASING A SUBJECT TO PROPERTIES: If it takes any cash out of your pocket then you must double that amount. That amount is what you must have in equity in the property.
*The assumptions, views, opinions and insinuations made by the host / guests do not reflect those of Propelio
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Grant’s Recommended Books:
Influence: http://amzn.to/2psvbb0
Traction: http://amzn.to/2kavg32
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