Subject-to Timing
A lot of my colleagues have been saying recently that the time for subject-to investing is over
. As an investor who has done countless subject-to deals in all sorts of markets and economies, I find that viewpoint disconcerting to say the least. However, it does bring to the fore some important issues with timing that many subject-to investors do not always factor in when they are doing their deals.When you are buying a house subject-to (or any other property, for that matter), you are going to be taking over that mortgage. That means that it must be in good standing. While this is fairly elementary, I have seen many would-be investors rush headlong into a subject-to transaction that has all the right stuff only to find out that they forked over good money to a seller when they should have been putting part of that payment toward bringing the mortgage current.
In these times, there are literally hundreds of thousands of distressed properties and distressed homeowners. As a result, there are a lot of really great opportunities out there to make money in real estate, and one way to get your hands on a lot of good properties fairly easily is to get involved in subject-to transactions. However, while you may need to pay that homeowner something to get your name on the deed while their name is still on the loan, it is not reasonable to expect that they should not be held partially responsible for the default if one exists. Be very careful to check your timing when you are doing subject-to transactions to make sure you are not actually going to owe far more in that first months payment than you bargained for.
When you are working on a subject-to deal, timing is everything. If possible, you will find a distressed property that is not actually in default. However, this is becoming increasingly difficult to do. Make sure that you hear direct from the lender just exactly what is owed and will be owed at the time of closing. Many times, lenders will waive some or all of the fees if they think that this will help or persuade the borrower to bring the loan current, so be willing and ready to negotiate. In fact, sometimes you will find that the closer a home is to foreclosure, the more willing the lender may be to work with you to avoid foreclosing. This will be largely dependent on the specific circumstances, however.
Just always remember to find out exactly where your loan stands not only in terms of the requirements of the loan, but also when it comes to the status of the loan. It could be the difference between a great subject-to deal and a poor one.
Peter Vekselman has been successfully investing in real estate since 1996.He has completed over 1200 real estate deals, owned a construction company, been a private lender, and owned a property management company. Peter currently works with clients all over the US helping them achieve riches in real estate investing. For more information please visit www.CoachingByPeter.com
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