How Can a Subject-to Deal Help a Distressed Homeowner?

Doing a subject-to deal with a distressed seller means they keep the loan in their name even though they are no longer responsible for the payments. Sometimes, this can raise unnecessary red flags to them, thinking it is too good to be true.

However, there are many benefits to distressed homeowners to go through a subject-to sale of their home.

What Is a Subject-to Real Estate Investment?

Subject-to-investing is one method I teach in my courses. It has made me a lot of money over the years, and now I teach my students how they can do the same. 

A subject-to-deal is very low risk for the investor. In this type of transaction, the owner has a traditional loan on the home, and they are currently responsible for making the payments. Sometimes, they can no longer make these payments. 

This is where you come in as an investor. You will enter into a “subject to” deal with the owner and the lien stays in their name. You, in turn, get the deed to the property. As long as you make the payments on the loan, you keep ownership of the property. You won’t need your own credit to get a mortgage. 

How to Ease a Distressed Homeowners Concerns about a Subject-to deal

In a meeting with a seller about a subject-to deal, you will probably hear several objections. I will explain a few of the most common and how you can ease their fears and educate them on how they will benefit from working with you.

1. It will hurt my credit.

In a subject-to transfer the loan stays on the homeowners credit, even though you have ownership by obtaining the deed. Because you will make sure the payments are made in full and on time, the seller’s credit will not be negatively impacted. In fact, it might even help it. 

2. I won’t be able to get another mortgage.

As long as the seller can show a lender that someone else is making the payments on the loan, they can still qualify for another mortgage. So, if their goal is to move to a more affordable home, the subject-to-deal shouldn’t impact this if they otherwise qualify for a mortgage.

3. What if you stop making the mortgage payments?

If you, as the investor, stop making the payments, you no longer have the benefits that come along with holding the deed, which is likely to make you money. So, you can explain to them that financially it would make no sense for you to stop making payments. 

For more information on subject-to real estate investing and how to work with motivated and distressed buyers, I invite you to start your journey by getting your free Unlimited Funding Kit.