What does “subject to” mean?
This term (sometimes called “sub-to”) describes a creative acquisition method for real estate investors. The purchase is being made “subject to any existing loans”.  So, the investor is wise to perform a thorough title search before consummating this type of deal.  Typically, a homeowner that is facing foreclosure will sign over the deed to his house to an investor, who catches the loan up on back-payments and penalties (if any) and promises to take over the existing payments on the house until he can sell it or refinance the loan.  The existing loan stays in the original homeowner’s name until one of the two happens.  So, it is somewhat of a “leap of faith” for the distressed homeowner to agree to this…but it sure beats the alternative!  The investor gets a great deal (providing the house is not upside-down), because this acquisition usually takes little to no cash.  And, unlike an assumption, there is no qualifying or lender’s red tape to endure.  The investor can then either flip it, wholesale it, or keep it as a rental, usually making a pretty decent profit!

Posted By: Greg Hatcher on Friday, October 23, 2009