“Subject-To” real estate transactions can be beneficial for both the buyer and the seller as long as the right protections are put in place. The following is a brief overview of these types of purchases. If this is something you are considering – either as a buyer or seller – contact our Stamford real estate law firm for more detailed information.
What Is a “Subject-To” Transaction?
A Subject-To real estate transaction is when a buyer purchases a property but the mortgage stays in the seller/current owner’s name. A deed is drafted that turns the property over to the buyer, but the mortgage – and legal obligation to pay it – is still on the seller. The financial institution that holds the mortgage is not notified of the transaction. Instead, the buyer now takes over the mortgage payments. These transactions typically involve little or no cash and no credit.
Subject-To transactions are often used in situations where the current seller has fallen behind in their mortgage payments and is facing foreclosure. The benefit for the seller is that the foreclosure does not take place and with the buyer now taking over payments, the seller’s credit will begin recovering.
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