When a homeowner is facing negative equity and wishes to sell their house without incurring additional expenses, one potential strategy is exploring a "Subject-To" (Sub2) transaction.

First lets understand negative equity,

Negative equity, also known as being "underwater" or "upside-down" on a mortgage, occurs when the current market value of a property is less than the outstanding balance on the mortgage secured by that property. In simpler terms, it means that the homeowner owes more on their mortgage than what the property is currently worth.

  1. Market Value vs. Mortgage Balance:

    • Market Value: This is the estimated current value of the property based on factors such as the local real estate market, comparable sales, and the condition of the property.

    • Mortgage Balance: This is the remaining amount of the mortgage loan that the homeowner has yet to pay off.

  2. Calculation of Negative Equity:

    • To determine negative equity, subtract the current market value of the property from the outstanding mortgage balance. The formula is: Negative Equity = Mortgage Balance - Market Value.

  3. Implications for Homeowners:

    • When a property is in negative equity, it means that the homeowner wouldn't be able to fully cover the outstanding mortgage balance by selling the property at its current market value.

  4. Causes of Negative Equity:

    • Negative equity can result from various factors, including a decline in property values, economic downturns, high-interest rates on the mortgage, or taking out a loan with a small down payment.

  5. Risks and Challenges:

    • Homeowners with negative equity face challenges if they need to sell their property, as the sale proceeds may not be sufficient to pay off the mortgage. This situation can limit the homeowner's options and may lead to financial difficulties.

  6. Impact on Selling or Refinancing:

    • Negative equity can make it difficult to sell the property, especially if the homeowner needs to relocate or downsize. It can also hinder refinancing opportunities since lenders typically require a certain amount of equity in the property

      Now lets explorer the options available for you such as subject-To (sub2)

What is a Subject-To (Sub2) Transaction? A Subject-To transaction is a real estate strategy where a buyer purchases a property "subject to" the existing financing. In other words, the buyer takes over the existing mortgage payments without formally assuming the loan. This can be a solution for homeowners facing negative equity, as it allows them to transfer ownership without paying off the mortgage in full.

Steps to Sell Your House with Negative Equity via Sub2:

  1. Understand Subject-To :

    • Before proceeding with a Sub2 transaction, it's crucial to consult with professionals, Brownstone consulting has helped many homeowner to sell their negative equity homes without out of pocket money, actually the majority has walked away with enough money to cover their closing cost moving expenses and even more, we can provide guidance on the legal and financial implications.

  2. Assess the Existing Mortgage:

    • Review the terms of the existing mortgage. Some mortgages may have a "due on sale" clause, which means the full loan amount becomes due when the property is transferred. While this clause may be enforced by the lender, many Sub2 transactions proceed without triggering it.

  3. Meet the Investor:

    • Brownstone consulting connected to one of the largest network of real estate investors in the country that are well experienced in Sub2 transactions. we have a deep understanding of the process and are able to navigate any challenge throughout the process.

  4. Negotiate Terms:

    • we will work with you and the buyer to tailor an agreement that secure and benefit both parties.

  5. Create a Purchase Agreement:

    • Our attorney will Draft a legally binding purchase agreement that outlines the terms of the Sub2 transaction. we will ensure that the agreement is clear, and all parties involved understand their responsibilities.

  6. Transfer of Ownership:

    • Once the purchase agreement is signed, and title insurance provided the ownership of the property is transferred to the buyer. The buyer begins making mortgage payments directly to the lender according to the agreement.

  7. Due Diligence:

    • Both parties should conduct due diligence to ensure compliance with local laws and regulations.

      Brownstone Consulting will help you sell your "negative equity home" with no money out of pocket, contact us Today.