How to protect oneself during an assumption

[Loc R.]

So I am trying to help a friend piece together a deal.

She is upside down on an "investment" condo she owns and currently rents out. She owes $300,000 on it and it's probably worth $240,000 right now. She doesn't want to short sale it because she doesn't want to ruin her pristine credit. It is a negative cash-flow situation.

Now, here's the interesting part. She has come across an investor who likes the property, and has offered to take over the payments. According to her, he wants to have control of the property until the market comes back because he wants something in that part of the country and he can afford to take the negative monthly hit until the market rebounds.

So, my question is how would you structure this deal? I'm thinking a third party servicer (maybe an escrow company?) would be brought in to take the renter's rent + HIS payment to cover HER mortgages.

My first thought to her was that her credit would still be at risk if he assumed the loans.

Thoughts?

[Jon Holdman]

He's not going to assume the loan. Unlikely the lender would allow that. He might buy this deal subject to the existing loans. I for one would NEVER sell a property that way. Your friend would be giving up ownership of the property but would still be responsible for the loan.

She doesn't sound like a desperate seller. Selling subject to is an alternative for someone who's so desperate to get rid of the property they're willing to take the risk.