Subject to properties

1 Reply

Hi Everyone,

My name is Tanya. I'm pretty new to RE market. I've read an RE article and it mentioned about Subject to properties. I honestly don't quite understand about it. I'd like to know what exactly it is. What are pros and cons of buying subject to properties? Why do investors buy this type of property? Can anybody please give me an example of buying subject to? 

Your response will be greatly appreciated! 

Tanya :)

Hi @Tanya Jayakom 

I would highly recommend checking out Podcast episode 2

Basically, though, subject to is when a motivated seller will deed a property to you and you agree to continue paying the mortgage even though it remains in the sellers name.  Investors would want subject to properties because they don't have to worry about getting financing for the property (maybe their own credit isn't great or they already have too many mortgages) because the mortgage is already in place.  Plus, they often don't have to put much money down because the seller is just happy to get out of the property and that someone will continue paying the mortgage so they don't get a foreclosure on their credit report.

The main con to subject to is the due on sale clause which gives the bank holding the mortgage the right to call the entire loan due since it was sold.  If this happens, you would lose the house unless you can quickly come up with that money or refinance it into your own name.
Hope that help... definitely listen to that episode of the podcast.

Brett

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