A "Subject-To Transaction" is where the buyer comes in and takes over the existing mortgage on the house. The ownership of the house will transfer to the new buyer, and the mortgage will stay under the previous owner's name.

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This benefits the seller in many different ways...

1) Like mentioned before, the homeowner does not have to cut a check to sell the house, in fact, they would make money 100% of the time.

2) Sellers are no longer liable for the mortgage payment, HOA, repairs, or any other payments relating to the house.

3) There are lots of homeowners that have purchased the house with very little money down, either 0% or 3.5% down. With having little to no equity, this is a good way for homeowners to sell the house without having to come out of pocket to sell.

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Sellers that are typically under water on their mortgage (meaning, they owe more than they can sell the house for) are good candidates for these types of transactions.

This mortgage will affect their Debt To Income and they will no longer qualify for another loan. Most investor friendly lenders will be able to wipe out the mortgage payment from Debt To Income when the mortgage is being paid by someone else. It will be considered as a rental income. 100% of the mortgage will be wiped away from the DTI.

I've never personally defaulted on a loan; but on the very slim chance that I get abducted by aliens the seller would get the house back if 2 months of payments were missed through a "performance deed". The seller would not have to foreclose and the deed would transfer back into the sellers name automatically, allowing them to sell the property again; essentially double dipping.

We deed the property back to the seller (stopping the due on sale) and execute an "Executory Contract" or "Agreement for Sale" with the same terms.

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