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Negotiating a "Subject To" deal
   by Matt Bowman   

  When you get in front of sellers after having done your initial negotiations over the phone with them, it is rare that they will even really care about all the paperwork that they are signing. Why is this? Because all the negotiations that have been done have enlightened the seller that this is perhaps not the only option for them (although many times it is) but it is the best option for them at the time.

  Believe it or not, as complicated as subject to deals might first appear, they are one of the easiest "creative" deals to negotiate. Why is that? Put simply, you are just offering to take over the seller's payments on the house. This is the best way to explain it to the seller. This makes the deal easy to understand and is the basic idea behind a subject to deal.

  After explaining to the seller that you will be taking over their payments, you can go on into a little more detail. You can tell them that this would involve them deeding the property to you and leaving the existing mortgage in place. Basically, they are just transferring ownership over to you. At this point, it is usually not necessary to go into an explanation of the due on sale clause or any other little details of the deal. This can all be explained when you get in front of the seller.

  Your first step in negotiating a subject to deal is listening. There are certain key phrases that sellers will say when talking to you on the phone that will let you know that you have a good subject to candidate. You want to listen for things like:

  • "I just want to dump the place."

  • "I just want to sell it for what I owe on it."

  • If I can't get it sold, Iím just going to let the bank have it."

  • "I just want some to take it over."

  When you hear these phrases or something similar from sellers, you will know that they are usually going to be very open to the idea of someone coming along and just taking over their payments. Very often, if they owe back payments and have been unable to sell the house, they are getting used to the idea of just letting the bank foreclose. If you are able to come along and take over their problem, catching the payments up and keeping them current, saving the sellerís credit, this is music to their ears!

  An easy way to "pitch" the subject to deal to a seller is to simply say:

"If I were able to take over the house and the payments for you, does that sound like something that might interest you?"

  If they answer yes, you can go on to tell them:

"Well, I may be able to take over the house by having you deed it to me and leave the existing mortgage in place. I can then take over the payments and get and keep them current, allowing you to move on and just be done with the house. Does that sound like something that would work for you?"

  At this point, you will know if you have a subject to deal or not. Remember that you never need or want to lie to a seller about what is going to happen in the deal. They need to know that while you will be taking ownership of the property, you will NOT be paying off or assuming their mortgage. You will own the house and the mortgage will stay in their name.

  That is it! Subject to deals really are that easy to negotiate. Sure, you will get a lot of rejections. Be prepared for it. If a subject to deal wonít work for the seller, it is possible that something like a lease option or a steeply discounted cash offer will work for them, so it pays to have a back up offer as well.

Matt Bowman, www.reitoolbox.com, is a full time investor who started investing in 1997. After several attempts to get started in creative real estate investing, he found his niche in sandwich lease options.
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