Contracts
In a 'subject to' sale, the buyer:
ATakes title free and clear of the existing mortgage
BTakes title subject to the existing mortgage but does not personally assume liability for it✓ Correct
CAssumes personal responsibility for the existing mortgage
DObtains a new mortgage to pay off the existing one
Explanation
In a 'subject to' transaction, the buyer takes title to the property with the existing mortgage remaining in place, but does not assume personal liability for the debt. The original borrower (seller) remains personally liable.
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Key Terms to Know
Short Sale
A sale of real property where the sale proceeds are less than the outstanding mortgage balance, requiring lender approval.
Earnest MoneyA deposit made by the buyer when submitting a purchase offer, demonstrating serious intent and serving as consideration for the contract.
ContingencyA condition in a purchase contract that must be satisfied before the sale can proceed to closing.
Purchase AgreementA legally binding contract between a buyer and seller that outlines the terms and conditions of a real estate sale.
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