Closing ‘Subject To’ deals are easier than you may think. Once you get the seller to sign the Purchase and Sale Agreement, you simply have a title company close the deal. Now, not every title company is familiar with ‘Subject To’ deals, so be sure you search around for one that has some experience with this type of deal. If you ask investors in your area for a reference, they may be able to point you in the right direction.
As a reminder, ‘Subject To’ means that you’re purchasing a home “Subject To” the existing mortgage. This means that you’re merely taking over payments on that loan, but the seller is signing the deed over to you. You’re not using any of your money or credit for this type of deal, yet you’re acquiring real estate.
If you’ve not yet closed on this type of deal, rest assured the process is relatively simple. I’ve had plenty of students go into an agreement, and then afterward tell me how smoothly everything went. In our courses, we dive into this in detail, and once you’ve done this a couple of times, you’ll indeed be more at ease.
The title company will be providing the necessary paperwork for closing, such as the HUD1 Settlement Statement, escrow instructions, and so on. However, you’ll be the one who needs to get title insurance, as this is what will protect you and the title company.
What is Title Insurance?
Insurance is what protects us from various things. Just like automobile insurance protects you in case of an accident, title insurance protects you from any title issues that could arise. You want title insurance because it protects you just in case there is a lien on that property. If you don’t have title insurance and, down the road, someone else claims that they are the property owner or had a lien, you could find yourself in a challenging position.
Now, if you have title insurance and by chance down the road a lien or ownership issue comes up, that insurance will protect you. This means that you won’t end up losing money that you’ve put into the deal.
You’re in charge of bringing your disclosure documents (we make this easy for you with our Unlimited Funding Program). You may run into various scenarios that will need different disclosures, as each state may vary, so check to see what your state requires.
You’ll need the Due on Sale Disclosure and the Statement of Understanding Disclosure, so give those to the escrow agent for a signature.
Finally, be sure you’re at the closing with the seller whether you’re buying ‘Subject To’, wholesaling, or whatever. Whether you’re using an attorney or a title company, you want everything to be signed when everyone is present.
If you want to learn more about the various disclosures necessary for ‘Subject To’ properties, check out our Unlimited Funding Program. You’ll want to become familiar with them as you continue to build your real estate empire.