What are the Problems/ Risks of a "Subject To" Purchase?

Question

I had a real estate investor offer a "subject to" purchase of my home. I understand the basics of it (he takes ownership of the house and continues making my mortgage payments until he re-sells the house, etc.), but it almost seems too good to be true. What are the problems or risks I would be taking on by selling my house this way? Is there a catch? Would I be better off selling my house the old fashioned way?

To add a few more details (and hopefully I am understanding & explaining this right)...it was explained to me that the buyer (real estate investor) would take on ownership of the house, he would get power of attorney with my lender & continue making my mortgage payments until he sells the house to someone else (which he claims is a pretty quick turn around). He re-sells the house (at a higher price) to someone who needs owner financing (ie, to people who are at a disadvantage of having bad credit, etc.) and that's how he makes a profit. When the house gets re-sold, our mortgage gets "paid off" and the process is complete. All of the paperwork has been drawn up by his attorney...he claims it's all legal, legitimate, & a quick way to get our house sold.

I have my house for sale. I am not in financial trouble. So why would I tell the housing authorities and move out? Maybe you misunderstood my question...

I am just trying to get more info on the pitfalls/problems with selling my house to this "investor" as a "subject to" purchase.

Answer 1

Without looking at your offer I dont know how to answer specifically but here is what a "subject to" clause means:
"I will do all the things I am promissing you to do as long as certain things happen". These types of clauses are common and used prior to closing, but it sounds like in your case it is an escape clause that can be used after closing. If the investor took title then the doctrine of merger would apply and the agreement that he owns it subject to him selling doesnt really sound right unless a document was signed at closing showing what real interest you have if any and what real interest the investor has and under what conditions. Sounds awfully fancy to me. I'd ask the Title company attorney to explain the agreement to you before you close. There really is no need to get that fancy when you are selling a home.

Answer 2

Don't have ANY experience in this area, but your question raises some big flags: Why would bank go along with deal as described unless you were sill responsible for mortgage. You could end up without house, and still have mortgage payments. Would never go for something like this unless person is refinancing home under his or her name.

Answer 3

you need to call the housing authories right away, and it may be rough but you should find a better place to live, some places might give you like a month free rent