Real Estate - Subject To Deals

Asalam u Alaikum,

I would like to ask about the permissibility of ‘Subject To’ real estate deals. In the US, “Subject-To” is a way of purchasing real estate where the real estate investor takes title to the property but the existing loan stays in the name of the seller. In other words, “Subject-To” the existing financing.

The agreement will be structured so that buyer and seller agree on a price for the property and a time period for repayment. This will be a 0% financing deal. However, in most cases the seller knows how much their mortgage payment is and they try to make it so that the monthly payment from the new buyer covers their bank payment.

Sometimes the seller can agree to let the buyer make a direct payment to the bank on their behalf or the buyer can pay the seller directly.

Looking forward to your opinion on this.

Wa alaykum salaam,

From what I understand, the seller remains the principal debtor to the bank, but the buyer now finances the mortgage and pays the debt on behalf of the seller to the bank directly or through the seller himself.

In essence, what is happening is that the seller is telling the real estate investor that you pay off my mortgage as the purchase price of the property.

So the seller appoints the real estate investor as agent to pay the bank the mortgage off.

I assume that there would be transfer of title to the property immediately and a sale would be executed for the property too, but the outstanding mortgage.

If it is as above, there is scope to be permissible because this is then a sale from home owner to investor, with the purchase price payable to the third party creditor (Bank) on the instruction of the Home owner.

Of course, a definitive answer can only be given when reviewing the structure in its entirety with the documents being reviewed.

Above are my intuitive thoughts on the matter and can be subject to change if anything materially non compliant was found.

Allah knows best

1 Like

Hi just out of intérêts why wiuld a deller want to Dell Theis property in this Way ,unless Maybe playback period is lengthened and rent/ plan deller pause is less than what they would originally be paying?