How to Write ‘Subject-To’ Offers

Some “subject-to” offers mean the purchase of the home is subject to the sellers’ existing home loan, in which the property is titled in the buyer’s name but the loan remains in the seller’s name. In this situation, buyers do not have to qualify for new financing, as they simply take over the seller’s mortgage payments. Sellers might agree to such a risky arrangement because a lifestyle change or other pressing circumstance motivates them to unload the property quickly. Those writing up such offers need a copy of the current mortgage terms. Also, when working with sellers to come up with terms for the buyer, they must ensure they are not violating any existing laws or skirting any legal procedures. The offer simply documents the existing payment and interest rate, but the buyer may be required to obtain a new loan and pay off the existing mortgage balance within a certain period of time. There may be a down payment requirement, and buyers may need to obtain homeowner’s insurance in their own names. Experts say buyers should avoid deals in which the offer price, repairs, and other expenses exceed 80 percent of the property’s worth. They also should understand that “subject-to” deals could trigger the mortgage’s “due on sale” clause, requiring them to either sell the home or secure alternative financing, though high foreclosure rates mean lenders likely will not call loans due if payments are being made on time. | Read More