A buyer purchases a house by taking over the seller's existing mortgage without formally assuming the loan. In one example, a buyer pays $12,500 cash to acquire a $250,000 house with a $225,000 mortgage still attached, avoiding qualification requirements and realtor fees.
Buying a property subject to the current mortgage is you are buying the property by taking over the existing mortgage without assuming it. Let's say that you have a property that you own and you just bought it. All right, you bought it 3 months ago, you paid $250,000 for it, you put 10% down, so you put $25,000 down. So you now have a mortgage for $225,000, but 3 months later you get a job offer and you have to move across the country. Can you sell this house for $250,000? Maybe, but if you sell it for $250,000, you're going to be paying a lot of realtor fees and you're probably going to walk away with no money. Alternatively, I could buy the house subject to from you, which means I become responsible for paying your mortgage. And let's just say I say, hey, I'll buy your house subject to and I'll give you $10,000 and I'll pay all the closing costs. So I pay the closing costs, $2,500. I give you $10K. I now have a house that I paid $12,500 all in for with a mortgage I didn't have to qualify for. I'm good. I'm in the house.
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