How is "Subject To" different from Seller Financing?

[Ivan Jouikov]

Everything I read so far has the 2 terms separated, yet they both seem to mean the same thing - seller keeps the loan, you put the property in land trust and assign yourself as beneficiary. You make payments to the seller.

How are the 2 different?

[Dory Peters]

Actually, a wrap is another name for a "subject-to" mortgage or all-inclusive trust deed.

I have to respectfully disagree with Nick's and Jon's statements about the seller lacking any control over the subject-to mortgage.

First, the seller can set up an escrow service account to handle the payments. This is safer for both the borrower and seller, because the escrow servicing agent takes the payment, pays the mortgage, and pays the seller his/her portion of the payment. Also, if the buyer is late or defaults, the servicing company can immediately update the seller.

Second, the seller's attorney could structure the agreement, so that the buyer's title is held deed in-lieu in the escrow account until the mortgage has been paid off. That attorney can also add verbiage to the agreement that specifies exactly what happens if/when the buyer is late or defaults.

Third, the seller could also establish an impound account, and require the buyer to escrow enough cash (which could also be part of the down-payment) in that account so that the seller may endure the foreclosure process without taking as large of a loss (if any).

The list goes on, . . . but the point is that there's definitely a way to structure a subject-to mortgage in a way that's safe for buyers and sellers alike.