The “Subject-To” method of purchasing real estate offers an innovative approach for investors. With this technique, the investor assumes ownership of the property while keeping the existing loan in the seller’s name. Essentially, the investor takes the property “Subject-To” the existing financing. By doing so, the investor gains control of the property and assumes responsibility for making mortgage payments on the seller’s behalf. This financing strategy allows properties to be acquired with minimal cash and no credit requirements, making it an attractive option for serious investors.

Typically, homeowners who are facing financial difficulties, such as falling behind on payments or entering foreclosure, are ideal candidates for “Subject-To” purchases. Investors can approach these motivated sellers and propose acquiring the property while keeping the existing financing intact. This arrangement creates a win-win scenario, as sellers can avoid foreclosure and the negative impact it has on their credit. Moreover, they benefit from having timely mortgage payments recorded on their credit report, courtesy of the buyer. For buyers, this method provides an opportunity to acquire a property without traditional financing, bypassing associated fees and costs.

While “Subject-To” presents numerous advantages, it is crucial to acknowledge potential risks. One such risk is the possibility of the seller filing for bankruptcy. In this situation, the investor becomes the owner of the house and its equity, but the original borrower remains responsible for the loan obligations taken “Subject-To.” If the loan is included in the bankruptcy filing, the property may be subject to foreclosure by the original lien holder. Therefore, investors must carefully evaluate and manage these risks when engaging in “Subject-To” transactions.