What is Subject To?
A "subject-to" transaction denotes the acquisition of a property with the retention of the existing mortgage, thereby assuming responsibility for the incumbent mortgage terms. Specifically referenced on HUD statement lines 203 and 503, the term "subject-to" signifies the procurement of the property subject to the prevailing mortgage conditions. Despite its historical precedence, some seasoned investors and brokers may not be acquainted with the subject-to strategy, occasionally expressing legal apprehensions. Nevertheless, the Internal Revenue Service (IRS) formally recognizes and validates the subject-to strategy. The term "subject-to" is explicitly delineated on the HUD statement, and the IRS furnishes detailed information on this subject in Publication 537.
How is the seller protected?
In a subject-to transaction, the seller's protection is ensured through the implementation of a pre-filled document known as a Performance Deed, overseen by the closing Title Company. The Performance Deed serves as a legal instrument enabling a borrower to transfer property ownership back to the original owner, thereby circumventing protracted foreclosure proceedings and associated legal expenses. Executed at the time of closing, this document is meticulously drafted by the Title Company, providing a structured and safeguarded mechanism for the seller's security in the transaction.
How does the seller's mortgage get paid?
A loan servicing company, functioning as a third-party intermediary, undertakes essential responsibilities associated with loan management. These tasks encompass the collection of payments, issuance of statements, and monitoring the borrower's adherence to payment schedules. This arrangement provides the seller with a sense of assurance, as their investment is entrusted to a professional entity adept at proficiently overseeing the intricacies of loan administration.
What happens if the buyer stops making payments?
In the improbable scenario of an unexpected event (such as an alien abduction) preventing payment obligations, the transfer of the property would be facilitated through the execution of the Performance Deed. In this circumstance, the seller would retain all funds previously remitted, and ownership of the house would revert to the seller. This mechanism ensures a systematic and equitable resolution in the event of unforeseen circumstances affecting the buyer's ability to fulfill payment obligations.
How get an offer for my listing?
To formulate a customized offer for your seller, you will need to gather specific information pertaining to the seller's current situation. While some inquiries may delve into personal aspects, rest assured that this data is crucial for a comprehensive analysis, ensuring the creation of an offer tailored to their needs. The following key pieces of information are indispensable for crafting the ideal proposal:
-Full Address
-Remaining Loan Amount
-Interest Rate
-Monthly Payment
-Assessment of Major Repairs Needed
-Timeline of Closing
What happens after I send the property information?
After you provide the initial information about your property we will review the details and may reach out to you by phone for additional insights. Once we've considered all the specifics of your listing, we aim to present a fair and transparent offer that benefits all parties involved. Importantly, there's no obligation on your part to accept the offer we propose. We want to emphasize that the decision to sell remains entirely in your client's hands.
Should your client choose to work with us, rest assured that the process will be swift, and you'll have the flexibility to select a closing date that suits your schedule. We believe in making the selling experience as easy as possible for our clients.
Will my client be able to qualify for another mortgage ?
When a borrower carries an obligation on a mortgage but isn't the one directly repaying the debt, the lender has the option to exclude the entire monthly housing expense (PITIA) from the borrower's recurring monthly obligations under certain conditions. This exclusion applies when the party responsible for making payments is obligated on the mortgage debt, maintains a clean payment history with no delinquencies in the most recent 12 months, and the borrower isn't relying on rental income from the relevant property for qualification.
To implement this exclusion and ensure the borrower's debt-to-income (DTI) ratio accurately reflects their financial situation, the lender is required to obtain the most recent 12 months' cancelled checks (or bank statements) from the party making the payments. These documents should meticulously document a 12-month payment history, demonstrating a consistent and timely payment record with no delinquencies. This process allows for a more precise assessment of the borrower's financial standing while accounting for specific circumstances involving mortgage obligations.
