Specialist · Member since 2026 · 22 posts · 7 votes
Subject-to gets pitched as simple — take over payments on the existing loan — but the deals that go sideways almost always trace back to skipping the same step: actually verifying the loan.
That means confirming the real payoff balance, the payment history (is it even current?), the interest rate and term remaining, and understanding the due-on-sale risk specific to that lender and loan type. Skip that and you're buying a black box, not a deal.
Anyone here done subject-to deals — what's your process for verifying the loan before you commit?
Lender · Eugene, OR · Member since 2019 · 2k+ posts · 1k+ votes
1mo
Terms of the existing mortgage (and clauses that preclude seller finance), financial status of the seller, payment history, mortgage balance, true market value of the property, home inspection of the property, etc., etc. I could go on, but I'll stick with: Verify everything. Period.
Terms of the existing mortgage (and clauses that preclude seller finance), financial status of the seller, payment history, mortgage balance, true market value of the property, home inspection of the property, etc., etc. I could go on, but I'll stick with: Verify everything. Period.
Completely agree — "verify everything" might be the most underrated four words in real estate. On the ownership side, the payment history check catches more red flags than people expect; a loan that's technically current but had multiple 30-day lates in the past year tells a very different risk story than one that's been perfectly on time. Do you find sellers are usually upfront about payment history, or is that the piece people tend to gloss over?
Absolutely. I would never structure a Sub2 deal based solely on what the seller says the balance or payment is.
I start by getting borrowers authorization signed from the seller to verify the loan directly with the servicer. I want to confirm the current balance/payoff, reinstatement amount if they're behind, payment history, interest rate, remaining term, escrow, taxes/insurance and any arrears.
I also pull title to identify other liens or encumbrances before determining what can actually be offered.
Especially with foreclosure leads, the existing financing is part of the asset you're evaluating. A deal that looks great based on what the seller remembers can look completely different once the loan and title are verified.
Englewood, NJ · Member since 2018 · 356 posts · 60 votes
2w
Verification process that's caught problems for me in South Florida sub2 deals, in the order I run it:
1. Payoff + payment history from the SERVICER, not the seller. I ask the seller to order a payoff statement and 12-month payment history while we're under contract. A loan that's "current" but shows two 30-day lates in the last year tells you the seller's cash flow is already tight — that's the profile most likely to keep drawing on any escrow balance or miss payments after closing.
2. Confirm the actual PITI breakdown. I've seen sub2 deals underwritten on the P&I number where taxes were escrowed at an old assessment and jumped 40% after the last sale. Pull the current tax bill from the county property appraiser site and the actual insurance premium from the declarations page — not from what the seller "thinks" it runs.
3. Read the Deed of Trust yourself before paying for an attorney opinion. Section 18 (due-on-sale) is standard, but the details that matter are whether it's a Fannie/Freddie uniform instrument, whether there's any rider (condo/PUD), and who the servicer is. Some servicers are aggressive on insurance lapses and ownership changes; some haven't enforced in years. You can't eliminate that risk, you can only price it.
4. Check for a second lien or HELOC. County clerk records search on the property + a UCC/name search on the seller. A sub2 where the seller also has a $60k HELOC drawing means their combined payment obligation is higher than the one you're taking over — that's how sellers keep "accidentally" pulling from the payment account.
5. Insurance restructuring in writing BEFORE closing. The moment title moves, the existing homeowner policy can be cancelled or non-renewed at claim time if the insurer learns occupancy changed without being told. Get the new policy bound naming the proper insured, don't rely on "we'll keep their policy."
The one that kills deals isn't usually the due-on-sale clause — it's discovering in week 3 that the real monthly obligation is $400 higher than the seller quoted. Verify the numbers from source documents, and walk when the seller won't authorize the servicer calls.
Investor · Get yourself trained before doing something inadvisable. · Member since 2024 · 3k+ posts · 1k+ votes
18h
Quote from @Olayinka Oyewole:
Subject-to gets pitched as simple — take over payments on the existing loan — but the deals that go sideways almost always trace back to skipping the same step: actually verifying the loan.
That means confirming the real payoff balance, the payment history (is it even current?), the interest rate and term remaining, and understanding the due-on-sale risk specific to that lender and loan type. Skip that and you're buying a black box, not a deal.
Anyone here done subject-to deals — what's your process for verifying the loan before you commit?
Well, there are several things that can go wrong useing Sub To, ask Pace Morby currently being sued in Florida.
Sub To is over sold and under cautioned, but the list is quit long of things than can and do go south that I've seen over the 30 years I've been doing them. They are powerful but a Bugatti exotic car is powerful and can do a lot of damage when used without proper instruction.