Date: May 28, 2009

Re: Recovering from Foreclosure - The "Subject To" Contract

The problem with Why Markets Turn™ is boredom. I already know when the next reversal date. I can make a trade then go out. Go back to sleep. Go golfing. What? Me Worry?

I surf the internet, watch porn (there's so much porn to download, so little time) aw come on I'm kidding. I was watching television about someone facing foreclosure and was thinking how wrong and utterly useless her advice was and thought maybe someone out there might need some real help.

You could have avoided the housing mess if you bought my book a couple years ago and read about the "black plague" I warned you to get out. But too late to get out at the top. You can find houses on Realtor.com in Detroit and other parts of the USA for a measly $1000. But I don't think it has hit bottom yet. Theres some slease bag rip off artists on eBay selling real estate using a quit claim deed. If you don't know the difference between a warranty deed and a quit claim deed get ready to be ripped off.

So this is for those after they lost their home to foreclosure or just got out of bankruptcy - are at the very bottom of the pile and want to buy real estate afterwards - you can have the world worst credit report, you can be unemployed, you can offer zero downpayment... and it doesn't matter if you or your wife is ugly.

Ok, reality check, it can't help you with making monthly payments, and you need about a hundred bucks to get the warranty deed recorded with the county.

And in these whacky times, it might be possible that you to talk the seller into paying you cash to buy their property! I've done that before.

The main part is the words on the contract. The key phrase is "subject to the existing mortgage ".

Its surprising that most real estate agents and even some attorneys don't understand what "subject to" really means. So let me explain the difference between "assumption" and "subject to".

The difference is liability. Typical standard contract forms used by real estate agents have "assumption" of existing mortgage which means you substitute your credit with the owners. You must submit your credit application to the existing mortgage company and they can accept or deny. If they accept and you fail to pay, then it will affect your credit rating, not the previous owner.

With "subject to" the existing mortgage, if you don't submit a credit application, you don't substitute your credit, and if you fail to pay, the old owner's credit rating gets damaged, not yours. You check with the existing mortgage company the balance of the mortgage, any delinquent payments, the shortage of the impound account, and then you decide if you still want the property.

So where do you find sellers who will take these contracts? For Sale By Owner, or take out a "I buy houses" classified ad and let them call you. You can pretty much forget about real estate agents as most don't understand "subject to" and even if they did, their broker probably won't want to use your funky contract and to make matters worse, if the seller has a broker, their idiot broker won't understand a "subject to" contract. So bottom-line deal direct with the owner.

You're going to need my "subject to" contract. Before you download the contract you should understand that it took me many years to develop. I've bought maybe a hundred properties using it. It is completely anti-seller / pro-buyer

When selling you have two choices 1) you can use the customary form used in your state or by your broker, as the customary forms are typically neutral to tilted in seller's favor, or 2) You can sell it under the same "subject to" the exisiting mortgage. The "value" and the reason why you will sell the property faster than a broker is because you can advertise the property "NO QUALIFYING"

And lastly you probably should run it by an attorney review and adjust it as different states have different laws, but basically the same. You may need to replace "deed of trust" with "mortgage".

Oh yeah, if you're some sleazy greasy investor who wants an unfair advantage when buying real estate, trying to make the first million bucks with real estate, or if you want buy a hundred houses with zero liability, zero loan applications, then you can use this form too.

This form is free. But you can buy me a beer later.

FREE Download "Subject To" Contract

PS. I have a whole library of real estate forms (well over 200 pages) if you want to get heavy into it you can convince me into releasing it to you.