A "subject-to" transaction refers to purchasing a property while keeping the underlying mortgage intact, essentially assuming responsibility for the existing mortgage. The term "subject-to" is mentioned on HUD statement lines 203 and 503, signifying that we are acquiring the property subject to the existing mortgage terms. Despite its long history, some seasoned investors and brokers may not be familiar with the subject to strategy, and may raise concerns about its legality. However, the IRS recognizes and acknowledges the subject-to strategy. 

Please note section 3500 of RESPA Code of Federal Regulation (CFR) document specifically states under the Line Item Instructions section for filling out the HUD “Line 203 is used for cases in which the Borrower is assuming or taking title subject to an existing loan or lien on the property."

The term "subject-to" is listed on the HUD statement, and the IRS provides information on the subject in Publication 537, which can be found at this link: Hud Example

Sellers may consider utilizing the “subject-to” method in low equity situations as it allows them to relinquish ownership of the property without the need to write a check or bring additional funds to closing. Depending on the seller's mortgage balance, this method may result in greater financial gain for the seller compared to a traditional sale.

Additionally, it enables the seller to move on from the property as they are no longer responsible for expenses such as repairs, maintenance, utilities, taxes, insurance, and HOA fees.

The seller's credit score may improve as a result of timely payments made towards the mortgage.

The seller is protected by a document called a Deed of Trust, and Promissory Note enforced by the closing Title Company. A Deed of Trust is a legal document that allows a borrower to transfer the ownership of their property back to the original owner to avoid lengthy foreclosure and lawyer fees. This document is completed at closing and drafted by the Title Company.

Typically this process occurs after 2 months or 60 days of missed payments as most beneficiaries (lenders) do not begin the process of pre-foreclosure until the third payment (90+ days) is missed.

No, we want this to be as painless as possible. We will pay for a loan servicing company to service our agreement.
A loan servicing company is a third-party entity that manages loan-related tasks such as collecting payments, sending statements, and ensuring that the borrower stays up to date on their payments. This helps the seller have peace of mind, knowing that their investment is being professionally managed.

While we've never missed a payment, we take precautions to ensure everyone involved is secured. We include a Performance Clause in our contracts which ensures that, in the event of a default by the buyer, the seller is able to repossess the property without a formal foreclosure via the Deed. If a scenario like this occurred, the seller would greatly benefit from any and all payments we made towards the loan, improvements made to the property, and appreciation in the property's value.

Typically this process occurs after 2 months or 60 days of missed payments as most beneficiaries (lenders) do not begin the process of pre-foreclosure until the third payment (90+ days) is missed.

In order to present your seller with a tailored offer, we will need some specific information about their situation. Don't worry, while some of the questions might seem a bit personal, they're essential for us to dive deep into the details and create an offer that's a perfect fit. Here are the key pieces of information we need to send the perfect offer: We will need the following information.
*Full Address
*Loan Amount Remaining
*Interest rate
*Monthly Payment
* Major Repairs Needed
Please send us an email here.

We’ll take a look at the information that you provided and may contact you by phone to get additional details about your situation and the property that you want to sell. Then, after considering all of the specifics of your home, we’ll usually be able to come up with a fair and honest offer on your property that’s a win-win-win for all of us. And once you have an offer from us, there’s no obligation whatsoever for you to accept it. We promise that the decision of whether or not to sell your home will always be totally left up to you. If you do decide to sell your home to us, the process will go fast and you even get to pick a closing date that fits your schedule!

When a borrower is obligated on a mortgage debt - but is not the party who is actually repaying the debt - the lender may exclude the full monthly housing expense (PITIA) from the borrower’s recurring monthly obligations if

the party making the payments is obligated on the mortgage debt, there are no delinquencies in the most recent 12 months, and the borrower is not using rental income from the applicable property to qualify.

In order to exclude non-mortgage or mortgage debts from the borrower’s DTI ratio, the lender must obtain the most recent 12 months' cancelled checks (or bank statements) from the other party making the payments that document a 12-month payment history with no delinquent payments. (Documentation provided by third-party servicing company)

Review full mortgage DTI details here:
Fannie Mae DTI Assessment

The short answer would be for as long as we can keep it. We advise sellers and agents to anticipate maintaining their name on the mortgage until the mortgage balance is fully settled. However, in our experience there are 3 ways in which the mortgage would be paid off early.

1. We refinance when better rates are available or when significant appreciation has occurred and we can pull cash out. A refinance would replace the seller’s mortgage with a new one.

2. We sell the property. Selling would trigger any existing liens to be paid off, clearing the seller’s mortgage. We typically don’t hold onto our investments for more than 7-10 years.

3. We sell another property and have excess cash on hand we need to deploy for tax purposes. When this happens we could use that cash to pay off some of our existing debt, such as the seller’s loan.