The Subject-to Investing Pitfall That Many Real Estate Investors Miss
Imagine that you have located an available property that is just perfect for your requirements
. You have a motivated seller who is willing to work with you in order to get the property off their hands. You also have a buyer who is interested in the property, and they are eager to get their hands on it. Best of all, you are going to be able to do this deal with basically no money down because the seller just wants a few thousand to get the property out of their life, and your buyer is paying you a great deal more just for the chance to take over that sellers payments. It is a great deal all around.Then, something goes wrong in Real Estate Investing. All of a sudden, your seller, who was really eager to work with you and make everything move as quickly as possible, is acting a little shady. They are dodging your phone calls and do not seem to be around when you come by to check in. Next thing you know, your buyer is out of town too and not taking calls from you or acting particularly interested in finalizing the details of the deal. Finally, for lack of communication, the whole deal falls apart. You throw up your hands and resign yourself to the knowledge that this one is just doomed to foreclosure. After all, it happens sometimes.
But then you notice something as the weeks pass. That house never goes into foreclosure. In fact, it looks like it is being taken care of. People are moving in. You are confused and frustrated after all, you had a deal and that seller sold right out from under you. You do some investigating and discover that your buyer and your seller cut a deal without you in it. The buyer paid a little more than you had arranged to pay the seller (but far less than they had agreed to pay you) and they just decided not to even reimburse you for all the time, effort and trouble you went to to make sure that the property was saleable, in safe condition and even available in the first place.
Its not fair, but if you do enough short sale deals at some point, if you do not take the proper precautions, you will get cut out of a deal. You need to make sure that you legally stake your interest in the property using a legally recognized document called an affidavit of interest. This will help protect you so that your work in a deal does not end up being for nothing.
Peter Vekselman has been successfully investing in real estate since 1996. He has completed over 1200 real estate deals, owned a construction company, been a private lender, and owned a property management company. Peter currently works with clients all over the US helping them achieve riches in real estate investing. For more information please visit www.CoachingByPeter.com.
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