Which seller is actually easier, the one two payments behind or the one just moving?

Question

I've had two sub-to conversations in six weeks and they were nothing alike, so I want to know which type people prefer to work with.

Seller A is behind. Two payments missed, a notice from the servicer, a 3.6% loan, essentially no equity left after arrears and fees. She wants out and she wants her credit intact. The deal solves a real problem for her, which makes it easy to agree on price, and the loan is the good kind. But I'd be bringing arrears money, the timeline is set by somebody else, and if she changes her mind midway I'm out whatever I spent.

Seller B is fine. Relocating in four months, 3.9% loan, about 40k of equity, no pressure at all. Nothing urgent, so nothing forces a decision, and he can walk to a regular listing any day. But there's no reinstatement to fund, no clock, and I could actually do diligence at a normal pace.

Everything I read says sub-to works particularly well with distressed sellers, which points at A. My gut as someone with a small portfolio and limited reserves points at B. I can see both.

diane_kowalski · Answer

Seller B can list the house the morning after you agree on everything and there's nothing you can do about it. That's not a small risk, that's most of the risk.

nicole_adeyemi · Answer

With A you're buying a deadline along with the house. I've watched a friend lose the whole thing because the reinstatement quote came back higher than the seller had said and there were nine days left. If you take that deal, get the reinstatement figure from the servicer in writing yourself before you commit anything.

priya_n21 · Answer

The credit angle in A matters more to sellers than most buyers realize. Preserving her credit while the payments keep going is the thing she'll say yes to. It also means her name stays on that loan for years, and she has to actually understand that before she signs.

hannah_west29 · Answer

Numbers side, cairn. A is 3.6% with no equity purchase, so your cash is arrears plus closing plus reserves, call it low five figures and you're done. B is 3.9% plus 40k of equity, which is either cash you don't have or a seller note that raises your monthly. On payment alone A is cheaper to own. The 40k in B buys you calendar time and a seller who isn't panicking. Whether that's worth 40k depends on how thin your reserve is, and you said it's thin.

laurenkim53 · Answer

In the small markets I look at, the seller behind on payments is usually the only sub-to conversation available. Choosing between seller types is a luxury of a bigger metro.

Which seller is actually easier, the one two payments behind or the one just moving?

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