Negotiating a "Subject
To" deal
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, I’m 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 seller’s
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 won’t 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.
