If you’re trying to buy a home and take care of “Subject To” payments, here are the important things to understand.

First, for anyone who doesn’t recognize what a “tied to” acquisition is, it’s when you simply take over the payments on an established mortgage with an informal deed transfer. That is all! The house now becomes yours. This is truly the best kept secret of educated real estate investors. While making your first “Subject To” purchase can be intimidating, it’s also a lot of fun! When the real estate instructor stood in front of the class and said, “getting a house is so easy,” everyone in the class, including me, thought he was a little crazy.

Well, he was right! Second to paying cash for a house, this is actually the easiest method of buying a house. You simply need to live the fear of the first! Once you’ve done a few of these, it just becomes second nature.

Things you need to know to take care of payments:

First: Chances are good that the salesperson contacted you from one of your lead generation efforts. You’ll prequalify them over the phone to the best of your ability, so hopefully you won’t waste your time and energy traveling home. You should have a good idea of ​​whether the house will work for you, and therefore the seller should have an idea of ​​what they are proposing before you even get on the phone with them. Also, you should have a “close” estimate of what they “say” is owed on the property. It is best not to mention that you want to take over payments over the phone. Wait until you are at the owners house for that conversation.

Second: Before heading to the property, you will need to prepare. You will need a stack of comparable sales (comps) so that you can compare the home to others in the neighborhood in order to formulate the true market value of the home.

You may be able to receive compensation by contacting a nearby title company or perhaps a closing attorney. When I started, I received compensation from the “Stuart Title” Customer Relations Department. Once you know the value of the residence, go to the house to meet with the owner and examine the house. In the event that the property needs a lot of work, then it might be in your best interest to pay for a home inspection.

After you get to the house and feel comfortable with the seller, that’s when you’d discuss with them about wanting to take over the payments and buy Subject To.” If we reach an agreement, then you’d sign an Agreement of Sale on the spot, along with all supporting documents, however many of you may not feel confident enough to do this, so I suggest you talk to the landlords and get comfortable together.

One very important thing you will need to do is find out the “EXACT” payment amount of the loan. And, you must determine if there is a prepayment penalty attached to the loan. The only way this can be accomplished is to have vendors sign an Authorization to Release Information Form (ATRIF). Then call the lender on behalf of the seller, fax the (ATRIF) and get the EXACT payment amount.

When you sign the Purchase and Sale Agreement, simply write “Approximately $XX,XXX” in the space designated for “Loan Balances Taken “Subject To”. The owner should have a previous payment coupon present which will give an estimated payment balance. Also indicate the amount to take over payments.

Third: When you have the house tied up, open Escrow and confirm all the details that have been provided to you. Loan balances, bonds, clean title, any inspection you choose to do, etc. Do your due diligence and make sure everything is in order.

Four: I have sellers sign all “Subject To” supporting paperwork when they complete and sign the Purchase and Sale Agreement. If you are having the owner place your home in TRUST (this is a real estate investor secret), it is the Trustee (not you) who will sign all the closing papers at the Title Company or closing attorney’s office . My recommendation is that you name the Trust with the last name of the owner. For example, “The James Family House Trust”. The benefits of using the last name of the owner of the house is simply because it holds the title in the name of the owner of the house, giving the impression that he never sold it. This could be essential to the Expiration Sale Clause concern.

Fifth: I highly recommend that you spend the fee and close with a title company or closing attorney to ensure you get a title insurance policy on the property. You’ll also need to deal with the issue of the homeowner’s insurance policy. It’s a bit confusing, but it can be done easily.
The most important thing is to make sure that the mortgage company does not find out about the transfer of the deed, which could put the expiration clause in play; Making use of Trusts helps in this matter!

If done correctly, take over the payments, the “Subject To” purchase can be closed in a few days. This can be a quick and easy way to buy a home. Once you secure the settlement amount and the title company gives you clear title, you can close.