Question(s) re. "Subject-to" purchasing of homes

[Janelle Niles]

Hello:

        I've read that one risk of buying properties "subject-to" is that the seller/mortgage holder may file for bankruptcy, and the home can then be foreclosed upon. However, if the buyer is paying the mortgage - what grounds would the lender have to foreclose the property? 

       Secondly, suppose the buyer refinances the mortgage soon after acquiring the property "subject-to". Could refinancing prevent the aforementioned foreclosure due to bankruptcy?

Many thanks,

Janelle

[Steve Vaughan]

The real risk in a sub2 deal is borne by the seller.  If the buyer makes waste or doesn't make the payments or pay taxes, insurance etc the seller has little recourse. 

The buyer carries the bulk of the risk however when they 'buy' on Land Contract or CFD. The property doesn't transfer into the buyer's name until it's paid off so liens may attach to the property if the seller gets into financial difficulty.