Final answer:
The arrangement where the buyer obtains the title to a property but the mortgage remains in the seller's name is known as 'subject to financing.' This contrasts with escrow services, which manage monthly payments for home insurance and property taxes.
Step-by-step explanation:
The real estate arrangement described where the purchaser receives the title while the seller's existing lien remains in the seller's name is commonly referred to as “subject to financing” or just “subject to.”
In this scenario, the buyer agrees to make payments on the previous owner's mortgage, but the loan itself isn't officially transferred to the buyer—the debt remains in the seller's name.
This can be a risky arrangement because the seller still holds the financial responsibility for the loan, even though they no longer own the property.
It's crucial to ensure that all parties understand the terms and obligations associated with a “subject to” agreement.
An escrow service is often involved in real estate transactions to handle the transfer of funds and documents.
In the context of monthly home payments, escrow can be used to manage the payment of home insurance and property taxes, simplifying the process for the homeowner by including these expenses in their regular payment.
This arrangement is different from a crop lien system, which historically allowed farmers to borrow money against the crops they were growing.
High interest rates and the nature of the arrangement meant that it was difficult for farmers to thrive financially.
Understanding these terms is essential in navigating real estate transactions, which can sometimes include complex language and legal obligations that can be confusing and potentially stressful without proper guidance or legal advice.