Assuming a Seller's Loan

[Rick Albert]

Hello All,

Does anyone have experience assuming another investor's loan? Basically a Buyer will take over the loan at the same interest or higher interest rate, and then pay the difference.

What risks are to the Seller since the initial loan is in their name but the title isn't? Am I missing something?

A recommendation to an experience attorney on the subject would be appreciated. 

Thank you!

[Clayton Silva]

Hey Rick,

While I have little to no experience with assuming someone's loan it is definitely a risk for the seller.  Typically assumption of the loan means the buyer is just paying the loan on behalf of the seller + a down payment (equity buyout) to get the seller to hand over the property.  

The risks to the seller: 

- missed payment = credit damage

- buyer owns property on title so hard for seller to come back for restitution

- buyer doesn't refi/sell in the agreed upon timeframe causing the seller to have an issue qualifying for other loans (after 12 months of someone else paying the new lender will not count the mortgage against the seller)

A qualified real estate attorney is a definite must in this scenario especially for the seller.  I think it is also common to keep the seller on title still.

[Wayne Brooks]

@Rick Albert @Clayton Silva To be clear….Assuming a loan means that the buyer actually applies to the current lender to qualify for the loan, if the lender agrees, the buyer substituted for the original borrower, with the original borrower being totally released.

What you are referring to is buying Subject To the th existing loan, where the seller remains liable….a Very risky deal for the seller and generally only done by someone either desperate and/or ignorant of the risks.

[Clayton Silva]

Quote from @Wayne Brooks:

@Rick Albert @Clayton Silva To be clear….Assuming a loan means that the buyer actually applies to the current lender to qualify for the loan, if the lender agrees, the buyer substituted for the original borrower, with the original borrower being totally released.

What you are referring to is buying Subject To the th existing loan, where the seller remains liable….a Very risky deal for the seller and generally only done by someone either desperate and/or ignorant of the risks.

So I have heard this, but I'm not sure this is always the case.  Reason I say that is, I have seen a lot veterans get screwed on this because they no longer have a VA entitlement if they let their VA loan be assumed.  

[Eliott Elias]

The seller will completely be relieved of the loan once it is assumed. If the buyer is purchasing the property subject to the sellers name stays on the loan.