Sat, Mar 20, 2010
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Very Important Subject-to Scripts
| | Tuesday, November 10, 2009 @ 01:06 PM EST
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Contributed by: Jason Hanson
Jason Hanson Properties
Read more archived articles about Buying
Knowing the answer to these few sub-2 objections will either make you, or cost you tens of thousands of dollars. First, subject-to is the best way to buy property right now and if you're new to the business… a subject-to is when you buy someone’s house and take over their monthly payment. However, the loan remains in their name.
So, you are the owner of the property and are on the deed, but the loan is still in the name of John Doe Seller. This is the way that you can buy 20 houses a year, for no-money down because you're simply taking over a payment.
Of course, when you first pitch a subject-to... to a seller they always ask, "how come the loan has to remain in my name, how come you can't get your own loan?" Here's what you tell them: “If our company had to go out and get our own loan we would have very high financing costs and we would not be able to purchase the property at the price agreed upon. We would have to purchase the property at a big discount if our own loan was involved”(Then you give them the low-ball cash offer number).
Since the majority of sub-2 people have very little equity in the property, they can't sell at a big discount and they now understand why we need to take over the payment and have the loan remain in their name.
Another question that very few investors know how to answer is, "what happens to the insurance on my house, if I let you take over my payments". The answer is that you will have the seller cancel their insurance policy and you will be required to get your own insurance on the place because you are the new owner. Also, you need to add the seller as an additional insured on the property since their name is still on the loan for the house. Adding someone as an additional insured should not cost you any money (my insurance company has never charged me a dime to do this).
Lastly, sellers want to know what guarantee they have, that you will make the payments on the house. That's when I point to the "special clause" my lawyer created in my subject-to contract which states if I ever become 30 days past due on a payment the house would automatically revert back to the seller... they love this clause and it makes them feel a lot safer when you buy the house from them.
There are many more scripts you need to know when buying a property sub-2, but these are some of the most common deal killers.
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