If the property is a rental and the rate is $1300 / month and the mortgage is $1500 / month then the seller is running at a loss of $200 a month (assuming we are discussing a property that is currently rented).

If the seller agrees to this deal they are now receiving $0 / month in rental income and paying $400. Now a loss of $400 / month. In addition they get the bonus of handing over any equity and all equity that is included in each months mortgage payment.

Why would any seller agree to this? It is a larger negative cashflow per month than simply holding onto the property.

I can see why you have people taking you up on this deal in droves!

In answer to some of the comment questions:

In “Subject to” investing, the deed is transferred, but the underlying mortgage and note stays in the sellers name. Since the deed transfers you are truly “buying” the property.

Documents such as a “limited power of attorney” and “right to release information” are usually signed by the seller authorizing the new owner to act on their behalf with regard to anything having to do with the property.

There is the a concern about “due on sale” clauses that accelerate payment of the mortgage on transfer of ownership. These clauses are standard in mortgage documents, however in practice lenders tend not to enforce this as they would rather receive payments on the property that force a foreclosure.

Just in case a lender does ever call a mortgage due, a document acknowledging this possibility is usually signed by the seller during the sale and retained by the buyer.

There is a lot of controversy surrounding purchasing “subject to” as unscrupulous characters can use it to skim equity from unsuspecting sellers. Leaving the seller on the hook for the mortgage. In practice a “Subject to” sale can often be the only answer to a sellers dilemma as closing costs are generally much lower than with a traditional sale.

To the question of what the purchase price would be, it is typically the mortgage balance, although I have taken over a property “subject to” where the seller gave me cash to take it.

James Miller

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When you purchase the property, what is the purchase price? Is it just the mortgage balance?

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