This is a purchase arrangement where the seller sells his/her home by having the buyer take title to the home and begin making payments to the lender for the mortgage and property taxes.
In a subject-to transaction, the seller still will be liable for the mortgage payment even though the buyer has taken over the payment.
Many times a subject-to transaction will include a cash down payment to the seller to make up the difference in the value of the home for previous payments.
Subject-to transactions are good for people who need to sell a property in a hurry and do not have time to go through a realtor.
Grace Cunningham has lived in her home for fifteen years.
She is a single mom and just got a job transfer across the country, which will take place in one month’s time.
She realizes that she will not be able to have the home sold through a realtor in that short time, and needs be out from under the home before she moves as she will not be able to carry two mortgage payments.
Grace’s credit is strong, and she has equity in the home.
The home is appraised at $150,000 and she has a mortgage balance of $87,000 ($120,000 loan at 6% Interest).
Grace may find a buyer to take over her $720 monthly mortgage payment and receive a cash down payment from the buyer to cover a portion of the $63,000 she has already paid off.
This would allow grace to have some money for a down payment on her new home and be out from under her previous mortgage.