Can You Avoid Foreclosure by Selling Your House “Subject-To” Before the Foreclosure Auction?
Facing the prospect of foreclosure can be an overwhelming and distressing experience for any homeowner. When financial hardship strikes, meeting mortgage obligations can become an uphill battle, putting the risk of losing one’s home in the forefront. However, amidst this daunting situation, homeowners may find a potential lifeline in the form of a real estate transaction called “subject-to.” In this article, we explore the concept of selling your house “subject-to” before a foreclosure auction and whether it can indeed be a viable option to avoid losing your home.
Understanding “Subject-To” Real Estate Transactions
A “subject-to” real estate transaction refers to a scenario where a buyer purchases a property while taking over the existing mortgage, leaving the original homeowner’s mortgage in place. Essentially, the buyer agrees to make the mortgage payments on behalf of the homeowner, who remains the legal owner of the property until the mortgage is fully paid off.
The process typically involves the homeowner signing over the deed to the property to the buyer, who will take control of the property and its responsibilities. However, it is crucial to note that the original homeowner is still technically liable for the mortgage until it is paid off, even though the buyer is making the monthly payments.
Can Selling “Subject-To” Prevent Foreclosure?
The primary objective of selling a house “subject-to” is to prevent foreclosure by transferring ownership and the mortgage obligation to a willing buyer. By selling the property before the foreclosure auction, the homeowner can avoid the negative impact on their credit score and maintain some control over the process.
When facing foreclosure, time is of the essence. Selling “subject-to” can be an option if the homeowner acts quickly and finds a buyer willing to take over the mortgage payments. However, several factors come into play that can determine the success of this approach:
Willingness of the Mortgage Lender: Before proceeding with a “subject-to” sale, the homeowner must seek the approval of their mortgage lender. Not all lenders may agree to this arrangement, as they would prefer the original borrower to remain solely responsible for the mortgage. Homeowners must consult with their lender and get written consent before pursuing a “subject-to” transaction.
Finding a Qualified Buyer: Locating a buyer willing to take on the responsibility of making mortgage payments and maintaining the property can be challenging. The buyer should be financially capable and committed to honoring the terms of the agreement. Professional assistance from a real estate agent or attorney can be instrumental in finding a suitable buyer.
Risks and Liabilities: While selling “subject-to” might save the homeowner from foreclosure, it does not absolve them of the mortgage liability. If the buyer fails to make timely payments or defaults, the original homeowner remains accountable for the mortgage debt and may face legal consequences.
Impact on Credit Score: Selling “subject-to” before foreclosure may have a less severe impact on the homeowner’s credit score compared to a foreclosure auction. However, missed payments or defaults by the buyer can still affect the seller’s creditworthiness.
Conclusion
Selling your house “subject-to” before a foreclosure auction can be a viable option to avoid losing your home and protect your credit score. It allows homeowners to transfer ownership and the mortgage obligation to a willing buyer, relieving them of the imminent foreclosure threat.
However, this approach comes with significant risks and considerations. Homeowners must seek approval from their mortgage lender, find a qualified buyer, and be aware of their ongoing liability for the mortgage. Moreover, the legal complexities involved in “subject-to” transactions necessitate expert advice from real estate professionals or attorneys.
Ultimately, whether selling “subject-to” is the right decision to avoid foreclosure depends on each homeowner’s unique financial circumstances, the willingness of the mortgage lender, and the ability to find a trustworthy and capable buyer. If executed properly, this alternative could be a lifeline for those facing the difficult prospect of losing their homes to foreclosure.