What is a Sub - To?

Question

I have googled this question and looked at several posts about a Sub - To but I'm still a tad fuzzy on it. As I currently understand it, a buyer finds a motivated seller, the buyer takes on the deed, but NOT the mortgage and merely agrees to continue payments. Is this the jist of it? And if this is the base of what a Sub - To is then what are the common pros and cons for the seller and buyer, as well as any tips and tricks you guys have come across?

Rose M. · Answer

If you type "subject to" in the search bar of the forum, you will get tons of posts to read through. I've been reading them for days. ;)

My understanding: You take a property "subject to" the existing financing. The deed goes in your name, the mortgage stays in the sellers name. The biggest possible con, that I understand, is the possibility of it being called for the "due on sale" clause.

Also, podcast 70 breaks it down.

Christopher Albritton · Answer

@ Rose M. That's what I tried to do, but nothing was ever completely broken down, as least from the posts I saw, hence my post here.

@ K Marie Poe Thank you thank you for clearing that up. I guess what I got stuck on was how "limited" this strategy is, but clearly this strategy is very versatile. Once again thank you for taking the time to clear it up for me =D

And thank you to the both of you for mentioning podcast 70, I'll look into that one. I've just started the podcasts with my handy dandy legal pad taking notes. I listened to the second podcast with Karen Rittenhouse and was a little confused on how she was able to get the seller to GIVE her a check for 9200 on top of the 65 cents on the dollar she made to the seller, which contributed to my confusion on Subject -To deals.

Account Closed · Answer

Podcast 70 is very interesting, but there's a specific re-sale strategy that can confuse the issue of what subject to means.  Grant's deals involve purchasing subject-to and reselling with seller financing.  Lots of layers there. Regardless, subject-to essentially means purchasing property subject to existing financing.

There's no one way to do a subject-to deal.  It's not necessarily about a motivated seller or lack of equity or any particular distress.

Subject-to means taking over a property by purchasing it (getting the deed) subject to the existing financing.  The purchase can be "subject to" many other things as well.  Taxes, other liens, HOA fees and liens, title flaws, code compliance issues, pending law suits, etc.  "Subject to" means the buyer is purchasing the property with knowledge of whatever the deal is "subject to".

If there is an existing loan, the seller is typically agreeing to make the payments. Sometimes they pay the seller on top of that, sometimes not.  Sometimes there is equity, sometimes not.  Sometimes the buyer agrees to pay off the loan within 1 or 3 or 5 years, but it's all negotiable.

Your exit strategy is wide open.  Could be keeping the property as a rental that you eventually refi.  Could be a flip that you instantly re-sell.  Could be your primary residence.  Could be a combination of buy and hold and then a re-sale. Make a plan for the property and negotiate a deal with the seller that works for both of you.