There is a buying strategy that I see all over social media.
‘Buy without having to qualify for a loan.’
‘Buy with no money down.’
‘Here is how I qualify for 20 investment properties without a job.’
This strategy is known as buying ‘subject to,’ and here is how it works… Investors (buyers) look for properties with low interest rates with little to no equity that are possibly in distress. If it looks like a seller is going into foreclosure, that’s perfect.
The buyer offers to purchase the property by having the seller transfer the deed to the property into their name and then setting up an escrow account to pay the seller the monthly house payment. Here is the catch… the loan remains in the seller’s name and the seller is responsible for that loan, and ultimately for the property, until that loan is paid off. It is possible to deed the property to that buyer ‘subject to,’ which gives the seller the ability to take the property back if the payments aren’t being made.
This is different from a normal buying situation where a buyer would secure their own loan, or use their own money to pay off the existing loan and the seller is completely released from the property.
In this instance, an investor can accumulate a large amount of property because they don’t have to qualify for the loans; you’ve done that for them. The loans are not in their name; they’re in yours, so they can buy more because nobody is checking their credit or ability to pay those properties off.
If you are considering selling your home to an investor, I strongly recommend legal advice.
