Subject to deals is one technique that you can use as a real estate investor. Many people don’t understand this method that violates no laws. Subject to is a term used to acquire a property that already has an existing mortgage on it but the person buying the property does not become liable for the existing mortgage debt. This is also known as taking the property subject to the existing mortgage.
In 1982, Congress passed The Garn-St Germain Depository Institutions Act that provides
for the federal preemption of any limitations on the exercise of due-on-sale
clauses imposed by state law. There is no mention that the house has to be owned or occupied.
Subject to is simply a disclosure to any exceptions to a free and clear title. These exceptions can include mortgages, property taxes, liens, and judgments. This type of deal is only between the buyer and seller. Most people who will deed away their property aren’t as interested in making a lot of money as they are in being able to make their mortgage payments. They just want to eliminate the pressure of their financial problems and not damage their credit.
Families who have had to move and are paying two mortgage payments will be more than happy to give you a subject to deal. You will be allowing them to bring their family together, protect their credit and keep them from losing one of their properties.
Seven Steps to a Subject To Land Trust Deal
- Find someone who’s behind in their payments or highly motivated.
- Have the seller deed their property to you into a land trust.
- The seller needs to make you a beneficiary an assignment of beneficial page attached to the land trust.
- Have the seller give you a specific power of attorney for that property that names you their attorney in fact.
- Have each seller on the deed sign a real estate transaction disclosure.
- Have seller sign a letter and send to the lender naming you as trustee and writing out why they are selling you deed to the property.
- Complete the subject to documents and forms.
The bottom line is to make sure that the property meets your goals before you agree to a subject to deal. If you want more information about other avenues of real estate investing, visit larryharbolt.com.