21 Feb 2013

What Does It Mean To Sell Your House ‘Subject To’?

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Many Austin, Texas, home sellers want to sell their home fast but cannot due to little or no equity.

Imagine that you have a house for sale that’s worth $150,000 and you owe $150,000  If you wanted to sell traditionally using a Realtor, assuming the usual 7.5% closing costs, you’d have to pay over $10,000 to sell this house.

Now imagine if you owed a little more than the house was worth?

Many distressed homeowners can’t afford to come out of pocket to pay closing costs and tragically allow their houses to slip into foreclosure.  This strategy destroys the home owners’ credit and brings property values in the neighborhood down.

Is there an alternative?

Yes, you can sell your house ‘subject to…’

What Does Subject To Mean?

Selling house ‘subject to’ means that you’re adding a clause in the contract stating that you will sell your house subject to the existing financing remaining in place until buyer finds conventional financing.

This means that you’ll sell your house (the Deed) but keep the financing (the Note or Mortgage) in place until the buyer refinances.

Why in the world would anyone do this strategy?  Well, if you have equity in your house and can afford to pay all closing costs, then you probably shouldn’t use the ‘subject-to’ strategy.

But if you’re not in this position, then this ‘subject to’ strategy is better than foreclosure.

Benefits of Subject To to Homeowner:  The biggest benefits are that a sale can occur quickly and there’s no closing costs.  Many buyers can’t qualify for traditional homes.  They have money to put down as a down payment and decent credit, but maybe their credit isn’t good enough or they are business owners or, for whatever reason, they can’t obtain a loan.  These types of buyers are actively looking for an owner financed home.  The investor you work with does all of the work and charges the buyer rather than the seller for the cost of the sale.

If selling your house quickly without coming out of pocket in order to avoid foreclosure is important, than this subject to strategy may be a good way for you to go.

Detriments of Subject To to a Homeowner:  When a sellers sells a house, they prefer that they transfer both the deed and the note to the  new buyer.  Leaving the note in their name leaves them to credit risk if the buyer doesn’t pay.  To combat this risk, it’s important to have a third party note company who handles collections and can notify the seller immediately if there are any issues and foreclose on the new buyer if necessary.

Many buyers who are facing foreclosure like using this option because the worst case scenario puts them in the same position they are facing currently if they do nothing, so it’s not much of a risk.

What an Investor Will Do For You:  An experienced real estate professional can assist greatly in subject-to deals.  First, they have the paperwork and team in place to make these types of transactions happen quickly.  Second, they have a large network of qualified buyers seeking to purchase homes with owner financing.

Lion Pride Capital | Subject To:  Lion Pride Capital Partners has a national network of investors who are seeking to purchase distressed properties.  We have an established team in place that knows how to buy and sell a house quickly using owner financing.

If you are need to sell your house fast but can’t pay closing costs, Lion Pride Capital can help.  Contact us today at (512) 296-2299


About the Author

Robert Guild has been the financial expert and the controller for both public and private companies for decades. Robert is now the co-founder of Lion Pride Capital Partners. At Lion Pride Capital Partners, we’re a team of investors. If you wanted to describe us in a couple of words, it would be: Expertise, Experience, Funds, and Network. We have experienced cash buyers and a construction manager who has been building and remodeling homes for over 20 years. We have a Realtor/Investor who finds us properties and markets our finished properties for sale. We also have a top mortgage banker with an extensive real estate portfolio and has been investing in real estate for over 20 years. I also have real estate investment mentors who are the most successful investors in Central Texas. We also have access to investor friends around the country so that together we can provide pretty much any solution to any problem in real estate for about any seller in about any situation. Regardless of your situation, we can help! Contact us today.

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