What is the
Subject-to Program?
The property owner sells the property to Raúl "subject-to existing mortgage".
This means that Raúl will take over the responsibility for the monthly mortgage, real estate tax, and insurance payments.
Oftentimes your closing costs and real estate agent commissions can be covered with this program.
“Sometimes you can save $35,000 for every $100,000 that your property is sold for!”
“I can pay for your closing costs and your agent’s commissions!”
Nancy was able to sell her property without any costs to her whatsoever!
Nancy purchased a property last year but recently got a better job in another state. If she were to sell the property now, she wouldn't make any profit due to commission payments and closing costs. However, Raúl has offered to cover these expenses in exchange for a subject-to agreement, which would allow Nancy to sell the property without having to pay anything out of pocket.
What if my property can’t get financed?
You can still get paid!
If the property owner has some little-to-no equity, but the property is not eligible for financing, Raúl can still take over the payments and pay you for what the property is worth.
Nancy thought she had to pay!
Nancy currently owns a property that is worth something, but if she were to sell it now she wouldn't make any profit; the real estate would take it in commissions. However, Raúl has proposed a solution - he is willing to take the property subject-to and also offered Nancy to pay what the property is worth, as well as to cover the commissions and closing costs, which means that Nancy will make a profit from this transaction.
What if I have a VA loan?
Keep your eligibility and still get paid!
Raúl has a solution for VA loan holders that enables them to keep their eligibility and also provides some money for the seller.
Nancy way able to get paid and keep her VA eligibility!
Nancy is currently in a tricky situation with her property, as she has a VA loan and there is no equity in the property. If she were to sell now, she would actually end up with a negative net due to realtor commissions and closing costs. However, Raúl has a solution by offering to cover these costs with a subject-to deal offer.
To get started, they decide to enter into a lease-to-own agreement. This serves the purpose of showing the VA loan officer that the property has been rented out. Once Nancy buys another property using her VA benefits, they will close the deal.
Nancy is not completely stuck in this new property though, as she has the option to move again in 2 years. If she does decide to move, she can prove to the VA loan officer that payments are being made by the Loan Servicing Company on the 2-year historical transactions.
What if I have a FHA loan?
Much like the VA loan scenario, property owners can still get paid and be eligible for other properties.
Nancy had permit issues and was able to sell!
Nancy decided to construct an addition to her house, but the construction was not properly permitted by the county. In this case, she risks not being able to sell her property . A combination of subject-to and seller financing can be a viable solution.
Additional Cases
Sometimes a property is not eligible for traditional financing. In such cases, the Raúl can still help you.
Sometimes there are balloon payment agreements. In such cases, when the balloon term is up, Raúl is able to close the deal without the seller’s involvement at all.
Nancy saved $35,000 when she took Raúl’s offer!
Nancy is a property owner who has decided to sell her rental property. Raúl, a real estate transaction engineer, has shown interest in the property and has proposed a creative financing offer. Nancy initially planned to sell the property on the market to pay off her debt, but Raúl explained that he could structure the deal in a way that would allow her to earn even more money without lowering her purchase price.
Raúl's proposal involves Nancy taking out a loan on the property and thus taking all the cash tax-free. He will take over the payments subject-to the new mortgage payments, and Nancy will benefit from interests on a second position lien that she will hold. By selling the property in this way, Nancy can save up to 35% on taxes or more; that’s a savings of $35,000 for every $100,000 earned!
Nancy asks Raúl if there is a catch, but he explains that there isn't, apart from the fact that the deal requires some extra steps. This is the power of creative financing - it allows property owners to earn more money and save on taxes without harming their financial health.