If you have been researching ways to sell your property quickly, you may have come across the term “subject-to” or “sub2.” It sounds complicated, but the concept is actually straightforward, and for many sellers, it is the single best option available.
What Is a Subject-To Deal?
In a subject-to transaction, the buyer purchases your property “subject to” the existing mortgage. The mortgage stays in your name, but the buyer takes ownership of the property and becomes responsible for making the monthly payments.
You transfer the deed, the buyer moves forward with the property, and your mortgage gets paid every month without you having to write another check.
Why Would a Seller Agree to This?
This is the question most people ask first, and it is a fair one. Here are the situations where subject-to deals genuinely benefit sellers:
- You are behind on payments: The buyer catches up your mortgage immediately, stopping foreclosure in its tracks and protecting your credit.
- You owe more than the house is worth: A subject-to deal can get you out from under an underwater mortgage without a short sale or foreclosure on your record.
- You need to relocate quickly: Instead of waiting months for a traditional sale, you can close in days and stop making payments on a property you have already left.
- The property needs repairs: Banks require certain conditions for traditional financing. Subject-to deals have no such requirements.
- You want ongoing payments: Some subject-to deals include additional seller financing on top, creating a monthly income stream for you.
What About the Due-on-Sale Clause?
Most mortgages contain a due-on-sale clause that technically allows the lender to call the full loan balance due if the property is transferred. This sounds scary, but in practice, lenders very rarely enforce this clause as long as the payments are being made on time.
Think about it from the lender's perspective: they are receiving their monthly payment with interest. Why would they call the loan due and potentially create a problem where none exists? The Garn-St. Germain Act of 1982 also provides important protections for certain types of transfers.
How 30A Investment Group Structures Subject-To Deals
We prioritize transparency and seller protection in every subject-to transaction. Our process includes setting up a third-party servicing company to handle all mortgage payments, providing you with access to verify payments are being made on time, clearly documenting every aspect of the agreement, and working with experienced real estate attorneys to ensure compliance with state and federal laws.
We also carry insurance on every property we acquire, protecting both our investment and your interests as the original borrower.
Key Takeaway
Subject-to deals are not a loophole or a trick. They are a legitimate, legal strategy that has been used in real estate for decades. For sellers facing foreclosure, underwater mortgages, or time pressure, a subject-to deal can be the fastest path to relief and a fresh start.