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Subject-to is an excellent solution in real estate for a number of reasons:
1. Faster sale: Subject-to sales can be completed much more quickly than traditional sales, as there is no need for the buyer to secure a new mortgage. This can be a big advantage for sellers who need to sell quickly.
2. Increased pool of potential buyers: Subject-to sales open up the pool of potential buyers to those who may not qualify for traditional financing. This includes buyers with less-than-perfect credit, self-employed buyers, and those with irregular income streams.
3. Lower closing costs: Subject-to sales typically have lower closing costs than traditional sales, as there is no need for the buyer to pay for a new mortgage or title insurance.
4. Higher selling price: Subject-to sales can often result in a higher selling price for the property, as buyers are willing to pay a premium for the convenience and flexibility of this type of sale.
5. Passive income stream: Subject-to sales can provide a steady stream of passive income for the seller, as they continue to receive mortgage payments from the buyer.
Overall, subject-to sales can be an excellent solution for real estate transactions, providing benefits for both the buyer and the seller. It can be a win-win situation that allows the seller to sell their property quickly and profitably, while providing the buyer with a viable financing option that may not have been available otherwise.
common objections and solution that you or your clients can encounter along the road:
"I'm worried about the legal and financial documentation involved in a subject-to sale."
Solution: While there is some legal and financial documentation involved in a subject-to sale, this can be handled by an experienced real estate attorney or title company. They can help you navigate the process and ensure that everything is legally binding and compliant with state and federal regulations.
"I'm worried about the due-on-sale clause in my mortgage preventing a subject-to sale."
Solution: The due-on-sale clause is a risk with subject-to sales, but it is possible to mitigate this risk by working with an experienced real estate attorney. They can help you structure the sale in a way that minimizes the risk of triggering the due-on-sale clause, such as transferring ownership to a trust or LLC.
"I don't want to risk losing my equity if the buyer defaults on the loan."
Solution: While there is some risk involved in subject-to sales, you can protect yourself by requiring a sizable down payment from the buyer, and ensuring that the monthly payments are sufficient to cover the mortgage payments and provide you with a profit. You can also include a clause in the contract that allows you to foreclose on the property if the buyer defaults.
3. "I'm worried about the impact of a subject-to sale on my credit score."
Solution: A subject-to sale can have some impact on your credit score, but it is generally minimal if the buyer makes the payments on time. Additionally, you can work with a credit repair company to help repair any damage to your credit that may result from the sale.
4. "I don't want to deal with the risk of the buyer damaging the property or failing to maintain it."
Solution: While there is always some risk involved with any real estate transaction, you can protect yourself by requiring the buyer to maintain the property and make any necessary repairs. You can also include a clause in the contract that allows you to inspect the property periodically to ensure that it is being maintained properly.