A pre-foreclosure distressed seller might consider agreeing to “subject-to” (sub-to) terms to sell their property for several reasons:
- Avoiding Foreclosure: By agreeing to a subject-to-deal, the seller can prevent the foreclosure process and the associated negative consequences, such as damage to their credit score and potential eviction from the property. It provides an opportunity to resolve their financial difficulties and move on without going through a foreclosure sale.
- Quick Resolution: Sub-to deals can offer a faster resolution compared to traditional selling methods. It allows the distressed seller to transfer the property to a buyer who takes over the existing mortgage payments, relieving the seller of the financial burden.
- No Cost to the Seller: In a subject-to-arrangement, the buyer typically assumes responsibility for the existing mortgage, including making the payments. This means the seller doesn’t have to come up with any upfront cash for closing costs, pay off the loan, or handle any outstanding liens or judgments on the property.
- Preserving Equity: In some cases, the distressed seller may have built up equity in their property. By selling through a subject-to-deal, they can preserve that equity and potentially negotiate a deal where they receive some cash upfront or a share of future profits when the property is sold or refinanced.
However, whether a subject-to-deal is, a good decision for a distressed seller depends on their specific circumstances and goals. It’s important for the seller to carefully evaluate the terms of the agreement, consider their long-term financial objectives, and seek professional advice.