"Subject To" Real Estate

5 Replies


I've been looking at the "Subject To" real estate option and wondered if anyone could help? I understand the premise, but in practice it seems very hard to execute. I see people selling courses and books on the subject, but I'm not sure if it's just a pipe dream. The idea of finding a seller that would sign a "Subject To" agreement without attorney help seems very hard to fathom. Not impossible, but just very difficult and not very frequently available. Attorneys just don't seem to want to assist in any way as this kind of deal is promoting breach of contract with regard to the current owner and has some risk.

I guess if someone could convince me it's possible, would they be willing to explain a step-by-step process to me? I'm not even sure which forms (contracts/disclosures) I would need or where to find them. The nuts and bolts of the operation just seem difficult. 

Any help or guidance would be appreciated.



Sub2's aren't a pipe dream, but there can be some serious technical issues with SFR's. Most SFR have a "Due on sale" clause that gives the lender the "OPTION" of calling a mortgage when there is a change in the title of a property, or a possible change of title. It's a bit of a gray area for some attorneys, and they think it improper to possibly put an owner in that situation.

There are some real positives for doing a Sub2, even with a due on sale clause, but both the buyer and seller should be well informed of the potential gains and losses with the method. This reduces the number of deals available substantially.

I would not attempt a sub2 without an attorney doing the legal work. You can find one that will do it, it might take some digging, but they are out there. Start with title company attorneys.

Where Sub2 really works well is in the commercial world. Most commercial mortgages do not have a due on sale clause, so there is no gray area, it's sign and go. Some commercial mortgages require the borrower to qualify, some do not. It's just reading the agreement. As long as the title is transferred to the buyer and the mortgage remains in the seller's name, it's a "classic" SUB2 deal. Usually, though, the seller goes off the mortgage and the buyer goes on (assumption).

FWIW AFAIK, HUD 203b and 203K's are assumable. The original borrower is released on approval of HUD. I believe this is a mandatory step, and is only for owner occupants on loans after December 15, 1989. If the buyer takes over the mortgage this way, it's an assumption. Since there is no due on sale clause (except in a few cases, so read the docs) it could be done as a SUB2.

VA's are also assumable, again with qualification, so it's possible to do a VA as above (again, check the documents).

Overall, the numbers of SUB2's that are done are probably small, and the number that get called, even smaller. However, the risk is there, especially in a rising interest rate environment.

Hope that helps.

Good Luck,


Thanks Jim. 

I didn't realize that commercial loans don't normally have a DOS clause. Opens up new possibilities. Thanks for the other information as well. I'll give the title companies a shot and see what I can find. That sounds like a great place to start.

I'll let you know what I find out.


Hi @Michael Boyle !

That is one of the strategies that we employ and it does work quite well.  You don't have to use an attorney but we recommend using one for all of your deals.  That way you know that you are covered.  Not all attorneys will understand it and that is why you have to keep looking until you find a real estate attorney that does.  Having an attorney on you team will make you that much more professional to sellers and buyers.  All of our buyer signings also occur with an attorney as well.

As far as a step by step process, we do have associates all over the country who we teach this specialty to.  I'd be happy to point you in the right direction if you are interested, private message me.

@Michael Boyle ,

Subject-to is one of those strategies one can use to solve a specific problem where it fits the scenario. It may be a distressed property or some other "must sell" situation where the seller's needs are best served by it.

It's not necessarily a "use it anywhere" strategy.

For example, you might use it to prevent a foreclosure - bring the payments current and make the payments going forward in return for them conveying title to you or your entity. Then, either fix-and-flip / rehab it, lease-option it, etc.

You might use it in a probate case ... 

It's just not something you can try and talk a seller into because it serves your needs, it has to serve their needs AND yours. Else, move on to the next.

"Move on to the next" - that's the part which hangs up the folks who are still stuck in the "dearth of opportunities" mindset.

Thanks David. 

Although it's nice from a non-financing perspective, it is definitely something to keep that in mind. One would need to target that small segment with that specific need (foreclosures and probate sales as you mentioned) If those are the kind of deals you're looking for. Otherwise as you said - move on to another deal.

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