Not all real estate transaction techniques are transferable. In other words, just because you can assign a wholesale deal and make a fee, it doesn't mean that you should be assigning a subject-to transaction to make a fee. I’m not sure where this concept originally came from and how it took root, but it has led to a watering down of skills that is leaving thousands of homeowners in significant financial peril.
Ignorant or unscrupulous investors who represented that they were buying the house subject-to quickly assigned it to someone else for an assignment fee and then walked away from the deal thinking they were done with it, ignoring any commitments or obligations they may have either in writing or morally to the underlying seller.
I may get some hate mail regarding this, but I don’t care. Remember, I’m someone who understands subject-to transactions at a higher level than most. I see subject-to transactions as a form of seller financing, I have been involved in seller financing transactions for over 25 years, and I’ve seen it from the closing table to policy discussions with regulatory agencies and members of the U.S. Congress. Whether a conversation is being had over an individual deal or nationwide data and how it impacts housing policy, I’m aware of it and can converse intelligently on the subject.
Because of my experience, I can tell you that one of the most dangerous trends I see is thinking that we can take the tool of “assignment” from the realm of wholesaling (by the way, several states are cracking down on this, as they should) and use it in the subject-to arena.
There are three desirable exits for a subject-to transaction. The first is “buy-hold-rent”. You buy a property subject-to and hold it as a rental. The second is “buy-fix-resell”. You buy a property subject-to, clean it up and fix it, and resell it to an end buyer, paying off all your debt and taking your profit. The third, and most lucrative, way to handle a subject-to transaction, one that the “assignment” people never learned, is to buy a property subject-to, stabilize it, and then resell it on a properly documented, wrap all-inclusive transaction. This type of transaction can pay the investor hundreds of thousands of dollars over a few decades rather than making a few thousand dollars for a one-time assignment fee.
If you know someone who systematically assigns subject-to deals, please share this with them. They are leaving a lot of money on the table because they don’t know any better, and they are creating a transactional, moral, and ethical nightmare going forward.
A subject-to deal is not suitable for an assignment. Period. End of story.
