Subject To on Underwater Property

2 Replies

A friend of mine filed bankruptcy in 2009, surrendering his interest in his home and thereby eliminating his personal liability on his mortgage note. After five years, the lender still has not foreclosed and my friend still owns the property.

The fact that he still owns the property is a burden, and it is preventing him from buying his new home and he is still liable for the upkeep of the surrendered property.

He asked if I would be interested in having him quitclaim the deed to me for $100, so I could then rent out the property. He needs to get the property out of his name, and this seems like a viable solution.

Theoretically, this would simply be a subject to deal, where I am buying the home for $100 subject to the existing financing. My friend does not care, as his personal liability on the existing financing was already eliminated by the bankruptcy.

The estimated current market value for the property is between $93 and $97k, and the balance on the note is $138,000.

Any thoughts on this fact pattern? Seems like an opportunity to at least rent the property for a period of time while awaiting the foreclosure, which has yet to be commenced.

If you buy a property subject to you're now obligated to make the payments. Renting the property and not making the mortgage payments is "rent skimming". Its illegal in some locations and unethical everywhere.

When you buy subject to you're now on the hook for the full mortgage balance. Why would you pay $138K for a property that's only worth $93K?

@Joseph Brown

Will you be better off to go to the bank & see if the bank will short sell to you,

at the same time, finance it through them. So it will be WIN, Win , Win.for the bank,your friend & you.

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