Written by Evelyn C. Garcia
Edit by Akemis Ortiz
In terms of real estate, "subject-to" means to sell a property by transferring the deed over to the buyer while the mortgage remains under your name. It can sound pretty bizarre because you would think who would do such a thing? Let us break down a few scenarios.
You fall behind on your mortgage and/or taxes and aren't able to relocate and move out. You know that the house is worth more than what you owe, so you bargain with the buyer, then the buyer takes the deed and pays the mortgage so you may continue living there. The seller will eventually get the house and then would refinance some cash out of the equity and reinvest it. Most of these cases are usually with elders when they would want to stay living there until their time comes. My advice to the buyers would be to have a great attorney to draw this out for you and make sure the investment is worth it! For Sellers, make sure that you also have a great attorney and be sure that you can trust and commit the rest of your life to the buyer!
Another scenario may be that you owe more than your mortgage, and you want to start over again somewhere else. The investor will take the deed with the outstanding mortgage and negotiate with the bank. This method may or may not work whatsoever. Do not commit to a random investor who claims that it will work. They can’t just possibly guarantee this because it’s not up to them; it is all up to the bank. Please be very wary of those savvy investors with great personalities that promise the world.
The bottom line of this matter is that you must trust each other to actually make this work. And cooperation is a must from both parties. If all works out, then this can totally be a win-win!