"Subject To" in New Jersey

[Eric E.]

Hi I've done lots of deals, but I'm about to do a
"Subject to"  deal in NJ.   It's a fixed-rate home equity loan (1st position).

  The concept is easy to understand.    The devil is in the details.    Especially in NJ, one of the most litigious states.    Any advice from someone who has done it in NJ?  

[David Krulac]

Hi Darren, @Darren Sager and @Eric E.

Have done "Subject To" but not in NJ.  It can work good, but many properties don't fit well with the model.  The ideal property is one with little to no equity.  Many other models are looking for situations where there is a lot of equity, so this is the opposite.  It is similar to Mortgage Assumption, except that the you are NOT assuming any responsibility for the debt, which remains the sole responsibility of the original borrower. 

For the original borrower the negatives are that they are still on the mortgage, if you miss payments it is a negative hit to their credit, and it may stop them from additional borrowing for a new home.

For the buyer, the negatives are you need to make sure that the original borrower FULLY understands the process and doesn't try to come back and sue you, and it there are unrecorded debt against the property that could wipe out any profit, and the borrower could declare bankruptcy, or have a future financial problems.  Unrecorded debts could be Mechanics Liens, Welfare Liens, Government Liens or Nursing/Medicare Liens.