How To Sell Your House “Subject To” : Frequently Asked “Subject-To” Questions (FAQ)
Your Questions, Answered: Simplifying Every Step of the Selling Process.
Q: What does “Subject To” mean in real estate?
A: “Subject To” is a real estate strategy where a buyer takes over the seller’s existing mortgage payments without formally assuming the loan. The loan remains in the seller’s name, but the buyer controls the property and makes the payments.
Q: How does a “Subject To” deal benefit the seller?
A: A “Subject To” deal can benefit the seller by relieving them of the burden of mortgage payments, especially if they are struggling to keep up. It can also help them avoid foreclosure and preserve their credit.
Q: What are the benefits of buying a property “Subject To”?
A: The benefits for the buyer include potentially acquiring a property with little to no down payment, avoiding the need for new financing, and possibly securing better loan terms than current market rates.
Q: Is it legal to buy a property “Subject To” the existing mortgage?
A: Yes, it is legal to buy a property “Subject To” the existing mortgage, but it must be done carefully, with full disclosure to all parties involved. It’s important to be aware of the risks, such as the lender’s due-on-sale clause.
Q: What is a due-on-sale clause, and how does it affect a “Subject To” deal?
A: A due-on-sale clause allows the lender to demand full repayment of the loan if the property is sold or transferred without their approval. This can be a risk in a “Subject To” deal, as the lender may call the loan due if they discover the transaction.
Q: How can I protect myself from the lender invoking the due-on-sale clause in a “Subject To” transaction?
A: To mitigate the risk, some buyers set up a land trust or LLC to hold the property, which can make it less obvious to the lender that the property has changed hands. However, this is not foolproof, and there are still risks involved.
Q: What happens if the buyer in a “Subject To” deal stops making payments?
A: If the buyer stops making payments, the seller is still legally responsible for the mortgage, as the loan remains in their name. This could lead to foreclosure, damaging the seller’s credit.
Q: Can I sell a property I bought “Subject To”?
A: Yes, you can sell a property you bought “Subject To,” but you must ensure that the new buyer is aware of the existing mortgage and any terms related to the original “Subject To” agreement.
Q: Are there any alternatives to a “Subject To” deal if I can’t sell my property?
A: Alternatives to a “Subject To” deal include traditional sale, short sale, lease option, or refinancing. Each option has its pros and cons, and the best choice depends on your specific circumstances
Q: What are the tax implications of a “Subject To” transaction?
A: The tax implications of a “Subject To” deal vary based on factors like the property’s value, the loan balance, and how the transaction is structured. It’s advisable to consult with a tax professional to understand the specific consequences.
Q: How do I find properties suitable for a “Subject To” transaction?
A: Properties suitable for “Subject To” deals are often those where the seller is motivated to sell quickly, such as in cases of financial hardship, foreclosure, or relocation. These properties can be found through networking, direct marketing, or working with real estate professionals.
Q: Can a “Subject To” deal be used for investment properties?
A: Yes, “Subject To” deals can be used for investment properties, making it a popular strategy among real estate investors looking to acquire properties with minimal upfront costs.
Q: What are the risks for the seller in a “Subject To” transaction?
A: The main risks for the seller include the buyer defaulting on payments, the lender calling the loan due, and potential damage to the seller’s credit if payments are not made on time.
Q: How long does a “Subject To” agreement typically last?
A: A “Subject To” agreement lasts as long as the original mortgage, unless the buyer refinances or pays off the loan early. The terms can vary depending on the agreement between the buyer and seller.
Q: Can a “Subject To” deal help me avoid foreclosure?
A: Yes, a “Subject To” deal can help a seller avoid foreclosure by allowing a buyer to take over the mortgage payments, preventing the property from going into foreclosure.
Q: What kind of documentation is needed for a “Subject To” deal?
A: Key documents for a “Subject To” deal include the purchase agreement, a disclosure of the existing loan terms, a deed transfer, and an agreement outlining the buyer’s responsibility for making payments. It’s important to work with a real estate attorney to ensure all documentation is properly prepared.
Q: Can I negotiate the terms of the existing mortgage in a “Subject To” deal?
A: No, the terms of the existing mortgage cannot be changed in a “Subject To” deal. The buyer agrees to take over the payments under the original terms set by the lender.
Q: How does a “Subject To” deal affect my credit as a seller?
A: As a seller, your credit can be positively or negatively affected by a “Subject To” deal, depending on whether the buyer makes timely payments. If payments are made consistently, it can help maintain or improve your credit. However, missed payments can harm your credit score.
If you’re looking to sell your house but are facing financial challenges or an existing mortgage, a “subject to” deal might be the right option for you. In this arrangement, we take over your mortgage payments, allowing you to sell your house quickly without the burden of foreclosure or a lengthy sale process. This can be an effective way to avoid damaging your credit while still moving on from the house. Contact us to learn more about how a subject to deal could work for your situation.
Sell Your House “Subject-To”
Need to sell your house fast? With a “subject to” deal, we take over your existing mortgage payments, making it easier for you to move on quickly. Contact us to find out how this solution can work for you.