Sell Now Iowa does NOT practice purchasing any property “subject to.”
Any property with a mortgage may be purchased “subject to.” When an investor makes an offer to purchase a property “subject to,” they will often take into consideration the remaining mortgage balance. This can make their offer look appealing, but it carries a lot of risk. You will be left responsible for a mortgage on a property that is not deeded to you.
An investor looking to purchase your property “subject to” will paint a very rosy picture. They may promise to make future payments on your behalf (and maybe even catch up any missed payments!). They will boast that this will rebuild your credit and that it’s a great way for YOU to make money. They will likely inform you that it is all totally legal, and in some cases it might be. That being said, this path carries a great deal of risk! In reality, they lack the available funds or experience to actually invest in your property so they are asking you to take the risk for them.
Let’s talk about the risk. The mortgage remains in your name. Your credit may improve assuming this investor continues making payments. BUT keep in mind that there is no way to force them to pay. When you sell “subject to,” you will usually give the investor the deed to the property. This means the buyer owns the property and can do whatever they want with it. They may choose to begin renovations or even rent it out to a tenant all the while you are responsible for the mortgage payments if they fail to pay. This can get messy in a hurry!
If the investor decides to resell the property, there is no guarantee that they pay off the mortgage when the next buyer purchases it. They could take the money from closing and just walk away leaving you in a worse situation than before.
Another risk in selling “subject to” is difficulty in applying for loans or mortgages in the future. This mortgage will continue to haunt you and show up as a liability on your credit report until the investor pays it off as agreed or you do.
Are there times when selling “subject to” is a good idea? Sometimes. Selling a property “subject to” MIGHT work if you are selling to someone who you completely trust such as a family member or good friend. We HIGHLY recommend seeking legal assistance if you consider selling your property “subject to.” Iowa Legal Aid is a very low cost place to start.
One thing to remember is that unlike “assuming a mortgage,” an investor who purchases a property “subject to” did not have to formally qualify to make those payments. You will have no way of knowing if they are financially able to cover the mortgage payments. Your financial future deserves much more than empty promises and uncertainty.