October 5, 2023

SubTo teaches how to make money from properties that are on the brink of foreclosure. For Pace Morby, this is an opportunity to make big cash. The goal is to acquire and hold real estate by taking over the mortgage without a new contract with the lender. It's a non-traditional method, but it's legal. Pace claims it's the easiest way to make big bucks online. No cash and credit requirement. Whether you're licensed or not, everyone's welcome. 

Pace goes around the country to find houses that are behind their mortgage payments. He says there are two ways to profit: (1) to bring the deal to investors (like Pace) for a finder’s fee and (2) to become an investor like him. If you aspire to become the latter, he invites you to his SubTo coaching course. SubTo teaches realtors how to achieve financial freedom through creative finance. But with this course, the road to financial freedom comes at a hefty price. The program costs $7,800 for the core training, $10, 800 for the standard package, and $12K to $19K for the Mastermind. Students learn how to 

find sellers of distressed properties, 

negotiate deals, 

fund deals without a loan (through creative financing) and,

find a profitable exit strategy. 

Pace Morby calls himself the ‘creative finance junkie’. Some call him the ’SubTo Storyteller’. He took business management courses at Weber State University and Utah State University because his passion has always been in entrepreneurship. He started his first business at 23 years old, Arcadia Holdings in Salt Lake City, Utah. In 2011, he started another biz, a tech company called LifeNumber. He sold it the following year to focus on property flipping. He became a HomeVestors franchisee in 2016 and launched SubTo in 2019. Pace has been in the real estate rehabbing biz since 2011. He's built over 300 homes and flipped over 500 properties. Pace accumulated over $32 million worth of properties across America. With all these experiences, he’s more than qualified to coach a real estate investing course. 

SubTo and the Creative Financing Business Model 

Pace identified a problem in the market. Real estate agents are having a hard time getting a loan. So, he came up with a solution: subject-to-seller financing. Subject To (or SubTo) is a financing option wherein the buyer (usually a real estate investor) takes over the seller’s remaining mortgage with its existing loan terms. You don’t need a good credit score to qualify. Only pay the owner the paid portion of the mortgage. This financing option is advantageous for home buyers seeking lower interest rates. Those with poor credit scores who can't qualify for a loan may also hop on a deal like this. 

How do you make money with SubTo? Pace explains several income options. The most common strategy is renting/leasing the property at a rate higher than the monthly mortgage. Another option is flipping the property using the seller’s mortgage. If the property is in a strategic location, it can also be turned to Airbnb.

Pace Morby's SubTo is rated 4.5 stars in Trustpilot. Many say there’s value in this coaching course. However, 1-star reviews tell a completely different story. One said the course is a rip-off. Another warned about hard-selling on course upgrades. Some say they scam members with guideline swindling. The Morby Method follows an unorthodox process. Only very few can pull it off correctly (if there are any). I can’t find an unsolicited post that can testify that they're successful with the Morby Method. 

The business model is very risky. SubTo is not illegal, but it also doesn’t go through a standard process. You’re basically taking over another person’s mortgage without letting the lender know about it. SubTo doesn’t release the seller from responsibility for the mortgage. It will be hard to find someone who would agree with these terms. Another issue with the biz is that the original contract may have a due-on-sale clause. This means the lender can require full payment of the outstanding obligation if they suspect mortgage assumption. 

About 33% of Americans have poor credit standing. With scores ranging from 300 to 620, they’re less likely to qualify for a loan. Those who aren't qualified for a loan explore other financing options like subject-to-seller financing. Pace isn't wrong. There's an opportunity for business here. A report by ATTOM shows that there are already 97,608 foreclosure filings in the first half of 2023. There is a market, but it isn't big enough. The mortgage approval rate in the U.S. is around 80% according to Zillow's survey. This means that 4 of 5 Americans can get financing the traditional way. Since they can acquire loans, they wouldn't need to explore creative financing options. This biz has a very niche market. It's high-risk and prone to scams, conflicts, and lawsuits. SubTo's signup fees are also very steep. There are more risks than rewards in Pace Morby's SubTo overall. It's not worth investing in a program that has so many gray areas. 

About the Author Pamela Salvana

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