Wholesaling a “Subject-To” Deal

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Back in December of 2007, I met a nice couple with 2 kids in Rockford, IL. They had a dream of moving their family out to the country, and were eager to get out of the city. They both had jobs, and they owned their own online Christian decal printing company. But despite that, money was tight for them, and they didn't think that their dreams would come true anytime soon.

They were 4 months behind on their Mortgage payments. They had 2 Mortgages, neither one of which had a very good rate. They had contacted numerous “We Buy Houses” signs and none of them could make the deal work. Their home was worth about $117k, and they owed about $82k on the 1st Mortgage, and about $11k on the 2nd Mortgage. On top of that, the real estate market in Rockford is pretty flat – values tend to stay the same.

After meeting them and speaking with them for about an hour, I realized that a cash purchase was out of the question. I'm a wholesaler, and there wasn't enough equity to flip the contract. I did, however, have an investor who was itching to do a subject-to deal, because he had learned about them, but never done one. I also knew about them, but I had never done one, either.

When I told the couple that there wasn't enough equity for an outright purchase, they looked at me as if their dream of moving their kids out to the country was never going to happen. So I looked at them and said: “Listen, I have a way that we can make this deal work. But you will have to be open to getting creative.” Their eyes lit up and they replied with: “whatever we have to do, let's do it”.

I explained the process to them – how we would have to verify their mortgage terms and payoff with the Mortgage Company. How we would be creating a Land Trust and deeding the house to the Trust. The risks and the rewards. I also explained to them how I would be flipping this deal to an Investor, and how I would like them to meet the Investor, so that they felt comfortable with the deal.

I left their house that day with a 30 day Option, which detailed the terms of the deal.

I immediately went home and scoured all of my real estate books, the internet, and REIClub, to figure out HOW to do this deal!

Needless to say, I figured out how to do the deal. I put together all of the documents needed for closing, and about 2 weeks later we closed at my Investors office. They got to move out to the country with their children. My Investor got his first Subject-To deal. And I got a $2,800 fee for the deal. Everyone was happy that day!

4 months later, I got a call from the couple. They called to thank me, and tell me that my Investor had flipped the deal, and that their Mortgages had been paid off. They were happily living in the country, in a house that they were living in “rent-to-own”.

I called my Investor after I got off the phone with them (since the deal, I had moved back to Florida, and hadn't spoke with him). He informed me that he had made $26k on the deal! Not too bad! He also asked if I had any more deals for him.

Just goes to show that win-win situations are everywhere, as long as you're looking for them. Since doing this deal, I don't overlook any possibilities.

Josh Aney
Tampa, FL

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Wholesaling a “Subject-To” Deal

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