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Also referenced as: Sub2, Subject 2, Subject to, Subject-too, Subject too, Sub to
subject to adj. referring to the acquisition of title to real property upon which there is an existing mortgage or deed of trust when the new owner agrees to take title with the responsibility to continue to make the payments on the promissory note secured by the mortgage or deed of trust. Thus, the new owner (grantee) buys the property "subject to" secured debt. However, should the new owner fail to pay, the original debtor will be liable for the payment, but the holder of the mortgage or beneficiary of the deed of trust may foreclose and the buyer could thus lose title. This differs from the new title holder "assuming" the mortgage or deed of trust by a written transfer of the obligation. Such a transfer must be approved by the lender, since the new owner's credit may or may not be as strong as the original owner/borrower. (See: mortgage, deed of trust, assumption)
An expert in the subject-to niche describes subject-to:
The typical sub2 deal involves having a seller deed the property to you while leaving the existing mortgage in place. There is no “formal” assumption of the loan, you just start making the payments. There are many variations to this type of deal and as many ways to “take one down” as there are investors doing it.
Subject-to is a way of purchasing property when there is an existing lien (i.e., Mortgage, Deed of Trust). It is defined as: "Acquiring ownership to a property from a seller without paying off the existing liens secured against the property. It is a way of essentially assuming a non assumable loan. A high occurency of fraud is associated with subject-to deals. Use caution and consult an attorney before attempting to enter into a subject-to transaction. When used with caution and integrity this technique can be a wonderful tool for the experienced investor and a good last resort option for a distressed homeowner.
--Chandler Crouch, Real Estate Broker 14:53, 28 July 2009 (UTC)
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