In a subject-to deal, the buyer takes over the seller's mortgage payments and the deed transfers. Sellers choose this route to avoid foreclosure, skip closing costs and commissions, sell fast without staging, or dump taxes and repairs on the buyer instead.
Here's why some people say yes to selling their house subject to the existing mortgage. But first, a quick definition. What is subject to? Subject to is when the buyer makes payments on the existing mortgage, but the deed does transfer to their name. In essence, the loan stays in the seller's name, but the deed gets transferred into the buyer's name. Now you might be thinking, why would anybody do this? Well, there's a couple of really good reasons why. First, it allows them to avoid foreclosure. By allowing someone to catch up your arrears and immediately take over payments moving forward, it saves the seller from going through the foreclosure process, and then in essence, it helps save their credit. Number 2, if they don't have a lot of equity or they're underwater. By the time you factor in closing costs, arrears, repairs, a lot of times those without a lot of equity end up having to pay to sell their houses. They have to come out of pocket, that is, or they get stuck with a zero paycheck at the end. By selling subject to, it allows the seller to essentially walk away without having to cover repairs, closing costs, or or commissions. In essence, this responsibility transfers to the buyer. Number 3, because it's fast and it's simple. If you need a quick sale, this is the way to do it. You don't have to stage the property, you don't have to list it and hope that offers come in, and you don't have to wait. And number 4, to lift a burden. Sometimes taxes, insurance, repairs stack up and it makes it stressful for the seller to know what to do or know how to move on. This allows them to walk away without having to worry about any of those situations. However, it's important for the seller to fully understand the risks and really trust the buyer. You wouldn't want to trust just anyone with your credit. So if you've ever wondered why someone would sell subject to, it's not about being crazy. It's about solving real problems quickly. If you want help figuring out whether you could use this strategy, send me a message or shoot me a comment below.
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