How does a “subject to” mortgage work?
Question by ABC: How does a “subject to” mortgage work?
I am selling my house. My loan is for more that the house is worth. I am working with a realtor to do a short sale. This will however, put me at a huge tax liability(1099).(the house will prob be sold at 100K less than my loan)
Someone offered to buy the house under a “subject to mortgage” for what I owe. I am not sure exactly how this works. Are they trying to rip me off??? If they stop making payments will the bank come after me?? Or is he actually assuming the loan??
This sounds too good to be true. Should I just continue witht he short sale? THANKS.
Best answer:
Answer by whyworry
Your agent should explain this to you in detail, including the pros and cons; that’s why you hired her and will pay her a commission. Here’s one
link:http://www.ehow.com/how_8132_short-sale.html
Look up others and educate yourself. Nobody out there is looking out for your money. You have to.
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Tags: Mortgage, subject, Work
The “subject to” works only if you are willing to let the investor/buyer takeover your current loan. Depending on the real estate market and the criteria of your state this maybe or may not be a good idea. Let me elaborate; if your loan is fixed and has a low interest rate then it will be a good deal for the buyer as long as he keeps making the payments on time. Your buyer will make a contract and you should make one as well covering your butt, you can say something like the you’ll take the house back if one payment is missed. On the other hand if you have a lousy interest rate or a negative loan chances are that the new owner will not assume that loan and will most likely not want to pay a higher payment every time the rate changes. A short sale however wipes the slate clean from your existing loan and you don’t have to worry about anyone making payments on time. I have purchased houses in both aspects of the situation the only difference is that selling it to an investor is faster then waiting for a short sale to go through (usually 45-90 days depending on the lender) with a competent agent. In both cases there are some reprocautions they forget to mention, the banks will treat their loss as your gain and make it taxable income for more info on this talk to your accountant. Depending on the situation and the amount they might go after their money, but for as long as I have been doing this, chances for that happening is the same as being audited. Keep in mind that you are solely responsible for the loan, but if you have a solid contract that could hold up in court you could sell your house with a “subject to” clause on the purchase contract.