Posted by Jim K. on February 25, 2002 at 21:14:22:
You can buy a property “subject to” various conditions that exist for that property. For the investor it usually means “subject to” a loan, or loans, on that property. That means that as a buyer you will make payments on the loan. You do not legally “assume” the loan, meaning the lender will not be notified that you are making the payments, you just start sending the payments to the lender, or to the seller who will send them in ( risky - avoid) or to a trusted 3rd party/escrow.
The majority of the risk falls on the seller, since his name remains on the loan and he is trusting you to make the payments. There is also a risk that the lender will figure out what’s up and call the loan due.
There are various methods to mitigate these and other “subject to” problems.
The beauty of getting a property “subject to” existing financing is that you don’t need to qualify or find the financing, it’s already there.