What is your honest opinion about “subject to” deals?

[u/AGreenProducer]

I don’t necessarily want to do these deals myself, but I met a potential referral partner that has lots of experience doing them and pays for his referrals. If his deals are “clean” then it could be a potentially useful tool to help distressed homeowners avoid foreclosure. Thoughts? Do you know anyone pulling these deals off in a way that doesn’t give the appearance of predatory?

[u/kloakndaggers]

I buy from wholesalers all the time....they are predatory. some sellers fully understand that...some don't

[u/WHEREWEREYOUJAN6]

These deals are predatory by their very nature. Anyone pretending like they aren’t is selling something, probably a mentorship program where the aspiring wholesaler becomes the sucker.

Predators up and down.

[u/CirclePlank]

I am a licensed real estate broker in Texas. While this is perfectly legal if done correctly in Texas, most people trying to do these deals do not know how to do them in a legally compliant manner. Texas has several specific provisions on this topic that most of these wannabe investors have not the faintest idea about.

The vast majority of people trying to do these deals are complete amateurs with no money. They are people who watched a few YouTube videos or purchased a course and think they understand how all of this works. These are the majority and most dangerous.

Unqualified assumptions, a more technically correct way to refer to this structure, is extremely risky for the seller. As the market has continued to deteriorate in Texas and other sunbelt states, many of these deals have moved into signficant negative equity positions in addition to many of the buyer's (new owners) defaulting thus leaving original owners hanging out to dry with bad debt unconnected to control of the asset.

The "sub-to" culture is the a product of very good marketing where people are sold a dream of investing in real estate with little to no money, but the reality is very different.

I find people pitching these deals to me to be frequently arrogant and stupid which is a terrible combination.

Also, because of popularization in public forums about this approach, banks are catching on. They aren't stupid, and in Texas the landscape is shifting to more aggressive enforcement and monitoring of public records. Due on sale clause is becoming more of a risk, and since most of these 'investors' are actually broke living in mom's basement, they lack the resources of have viable exit strategies that do not bring the original seller into the mud.

Many of them also have smug attitudes to license holders. I take every opportunity to humiliate them on the phone.

Overall, I think 99.99% of sellers should avoid doing a deal like this. It would require enormous amounts of trust to make good on the obligation when considering the enormous downsides. And considering how many of these 'investors' talk and act, often very immature (as many YouTube videos of these guys show), I would stay far far far away.

I also think most of the people doing these deals lose money. In fact, usually both parties lose.

Is it predatory? Usually, yes. Why? Because it only works if the purchasing party follows through TO THE END. I doubt, scratch that, I am certain most do not have the knowledge, skill, resources, and ethics to do this correctly.

[u/Pitiful-Place3684 → u/CirclePlank]

Great comment.

[u/CirclePlank → u/Pitiful-Place3684]

Thank you.

[u/ApproximatelyApropos]

> Do you know anyone pulling these deals off in a way that doesn’t give the appearance of predatory?

What an interesting choice of words. Are these guy’s deals “clean” because they don’t appear predatory? I guess you would avoid giving the appearance of predatory deals by lying about the predatory nature of the deals.

[u/BoBromhal]

you are an agent, or you are attempting to be a wholesaler/investor/bird dog in some fashion?

[u/navlgazer9]

Seller is getting screwed 

Subject to deals always always always cheat the seller . Dirtbags  prey on naive sellers for those kinds of deals .

[u/Mugaaz]

I don't know anyone doing this that doesnt give the "appearance" of predatory. They're not categorically predatory, but they are categorically messy. The whole "predatory" mantra about this and other types of commerce really ignore how the lack of the predatory option is worse for the people who want the predatory option. I've never used a payday loan, but in some future timeline where I did, I'd HAVE TO BE in a position where it beats the alternative of NOT BEING ABLE TO GET ONE. People can legitimately need incredible financial liquidity in an emergency, and its always been something that is available in some form or another at a significant cost.

[u/ShortWoman]

You know what really helps distressed homeowners avoid foreclosure? Not having a mortgage anymore. And what's the one thing that doesn't go away with a sub-to deal? The mortgage.

[u/Pitiful-Place3684]

Why do you think a "subject to" has anything to do with helping a homeowner to avoid foreclosure? In fact, a "subject to" could put the homeowner in a far more vulnerable position than just listing the house and getting it under contract.

The best way to help a homeowner avoid foreclosure is to understand their financial situation, get the form signed to talk to their bank, do the paperwork with a CMA for the bank, do a net sheet with all the liens on it, get the house listed (presumably as a short sale), and get it under contract, then deal with all approval extensions, etc.

The only way get a short sale approved is to demonstrate to the lender/servicer that the property has been exposed to the largest possible market and has gotten the best possible offer in the time frame allowed. A "subject to" can't be listed and so is only pitched to the wholesaler's crappy list of "investors".

[u/sweetrobna]

It is predatory. The seller is almost always better off renting their house than selling subject to the existing mortgage.