Do You Have More Leverage In A Subject-to Deal If You Offer To Re-fi ASAP?
I'm sure a lot of homeowners are leery of signing off a deed to a Subject-To investor if the only thing they get in return is an agreement that the investor will make the seller's monthly mortgage payments in a timely manner. Some sellers may not even want any mortgage in their names.
So my question is, would I get more interest from distressed homeowners and more leverage over them if I offer to pay off their mortgages ASAP through a conventional loan in my name plus some cash-back in exchange for the deed to the house?
Obviously, if there is substantial equity in the house (over 20%), then I do not need to put any down on the conventional loan and there is no PMI on the loan.
I am looking to purchase my very first house and I was thinking that the Subject-To strategy would be a great way for me to get a nice first home at far below the market value. It will also help me get my feet wet in this type of real estate investment.
Also, how difficult is it to locate distressed homeowners with over 40% equity who are willing to do a Subject-To deal, even with my quick pay-off offer?
Let me know what you think. Your comments are welcome. Thanks for your help.
Dear Sir,
You may have to look awhile to find such a splendid deal 40% equity. My god what is he doing in foreclosure. Has not some smooth devil of a mortgage broker talked him into a refinance, yes even with his credit rating. Or failing that made him a small holding loan to cure while he reconsiders his options. Or impacted him with a private lender who wants everything.
Suppose you do find such a situation, it does occur. Just buy the property for the best price you can. Little money down, or just take it over and hand him a check in exchange for a deed. Whatever. At moments like that the best deal is the most rapid deal. To gain a heavy equity I throw lots of rules out the window. I handle things without closings or escrows. I give them a check, record their deed, check the title with the title company. I even do what is called an accomodation recording. Thats one where I record as soon as I get the deed not even waiting for the title company to do a check out. I have already done a preliminary myself.
I hope this is helpful. A deal with a 40% equity is very rare. But it does happen. Be prepared to hustle.
Cheers Lucius
Welcome to TCI kharvel,
Can you tell us which great state are you coming form and what source are you planing to use for foreclosure data?
Quote:
On 2004-02-18 03:23, omega1 wrote:
Welcome to TCI kharvel,
Can you tell us which great state are you coming form and what source are you planing to use for foreclosure data? <IMG SRC="images/forum/smilies/icon_rolleyes.gif">
Hi, I live near Seattle in Washington State. Also, I don't plan to look at foreclosures but at pre-foreclosures (when loan is at least 90 days past due). I don't know if I will get 40% equity but hey, I am a newbie so I don't know better
kharvel,
Where are you planning to get your pre-foreclosure leads?
JohnCl
I have inside information access at a major bank. That's all I can say for now.
No one has really answered my question. Do I have more leverage over a distressed homeowner if I offer to pay off his/her mortgage ASAP rather than asking them to keep it for a long while while I make the payments? Thanks.
The key word is "distressed homeowner". They are motivated to do keep themselves out of foreclosure. Why would you want to put yourself at risk by putting a new loan in your name. Keep looking for more motivated sellers that would be willing to work your way.
Thanks for the response. What about not-so-distressed homeowners? Are there large-equity homeowners out there who wouldn't waste their time with a typical Subject-To deal but would seriously consider a Subject-To deal that includes a clause saying that I would pay off their mortgage within an agreed-upon short timeframe in exchange for the deed and most of the equity?
If there are homeowners like that, how do I identify them? What are the characteristics of these homeowners and their situation?
The reason I'm asking is because I am in market for my first house which I would actually pay for and live in and I want to leverage my first-time-homebuyer situation as much as possible in order to get my first house at a substantial discount. Thanks.