What does it mean to buy a property “subject to?”

“Subject to” (as it relates to real estate) refers to a method of purchasing a property while leaving the seller’s existing mortgage(s) in place.

The seller deeds the property to the buyer, who agrees to make the existing mortgage payments on the property.  In most cases, the seller is not released from liability on the mortgage.  In some cases, the agreement may also include the provision that the buyer either sell or refinance the property within a certain period of time.

What is the main benefit?  The seller’s costs to sell are usually very small with this type of transaction.  It’s also easy to sell this way as the buyer does not need to qualify for a mortgage and incur a high cost for closing on the property.

The main negative?  Most mortgages contain a due on sale clause.  This allows the lender to call the note if there is a transfer of title on the property.  If the lender is made aware of the sale, they could require payment in full and the original owner (the seller) is liable party.

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