There’s a lot about the 80’s I don’t miss. Take parachute pants, for example. They were expensive, uncomfortable and difficult to clean. And who in their right mind ever thought the mullet haircut looked good, or that 25 years later some people would still have them?
As for the 90s, I’m certainly glad the whole purple and teal color scheme didn’t last. It seemed like everything from family room carpet to ski boat hulls contained those awful shades of grossness.
When I look back at the 2000s I can’t really think of anything that I’m glad is gone. However, there is something I’d like to come back– the “subject to” real estate deal.
In a “subject to” transaction the distressed seller signs the title of the property (usually a Quit-Claim Deed) over to the investor. However, the deed of trust remains in the original homeowner’s name. The investor brings the loan current and makes payments on the mortgage until the property can be sold. Of course, if the investor doesn’t make payments the original owner is still responsible for the note.
Why would a seller agree to do something like this? Three reasons:
1. The seller can’t afford to make the payment.
2. The seller is about to lose the house to foreclosure.
3. The buyer gives the seller some cash in exchange for the deed.
From 2004-2006 I acquired more than 100 properties using this “subject to” acquisition strategy. It required no credit and little cash. All I needed was a few bucks to bring the loan current and pay the homeowner for the deed. I purchased exclusively from sellers in foreclosure within 1-2 weeks of their trustee’s sale. Best of all, every one of these properties had substantial equity so I knew I’d make money on the flip.
Nowadays, locating a homeowner with enough equity to do a “subject deal” is difficult. However, I stumble across one occasionally.
A few weeks ago I contacted a seller in foreclosure in who I thought owed around $110,000 on his mortgage. The after repair value of the property was $160,000. Not a bad deal. We agreed to wait on writing up a contract until after the payoff came back from the bank and I’d had a chance to inspect the property. Below are some photos and as you can see it’s in pretty bad shape.
I elected not to do the deal. However, it had nothing to do with the repairs. I got the payoff from the bank and it was $119,000. Apparently the seller hadn’t made a mortgage payment in almost two years and the bank had just finally gotten around to starting the foreclosure. With an additional $9,000 in arrears there was no way the numbers would work.
Boy do I sure miss the 2000s.