In this solo explanatory video, Brittany Dawn Fields answers the most common questions about subject‑to real‑estate transactions. She first defines subject‑to as a deal where the buyer purchases a property while the seller’s existing mortgage remains in the seller’s name, often used when the seller has low equity, is in pre‑foreclosure, or faces financial strain. She addresses the feared due‑on‑sale clause, noting that banks almost never enforce it and, if they do, the parties can usually explain the arrangement or, as an extreme backup, deed the property back to the seller and set up a lease‑option purchase. To protect the seller’s credit, she recommends using a loan‑servicer that automatically withdraws funds from the buyer’s account and pays the mortgage, creating a clear paper trail. That paper trail can then be shown to a new lender, allowing the seller to remove the original loan from their debt‑to‑income ratio and qualify for future financing. She also discusses worst‑case scenarios—such as the buyer becoming incapacitated—explaining that the seller can foreclose more easily than in a traditional bank foreclosure because of the pre‑arranged paperwork. Finally, she emphasizes that sellers often end up in a better position: arrears are caught up, closing costs are covered, and the buyer has a strong incentive to keep the property, which can improve the seller’s credit and financial standing.
Chapters
If you're watching this, you probably saw my other video on subject-to and why a seller might use subject-to when trying to sell their home. I wanted to go over a couple of quick FAQs for some of you who may be wondering, well, how does this work and how is the buyer protected? The first thing I wanted to provide is a quick overview of what subject-to is for those of you who did not see my last video. Subject-to is when a buyer buys a house, but the existing mortgage stays in the seller's name. Now there's a number of reasons why someone might do this, including low equity or pre-foreclosure, or they're just in a tight spot financially and struggling. One of the most common questions that I get asked is, what about the due-on-sale clause? Won't the bank call the loan due? And the answer is that it's extremely rare. I have a friend who actually calls this the Santa Clause because it's rarely, if ever, seen. In most cases, if the buyer is making the payments, the bank's perfectly happy just accepting their paycheck. In rare cases where the bank might notice something is wonky and ask some questions about it, if that's the case, then we usually just explain to the bank what happened and they're usually good with it. In even more rare cases, as an extreme backup plan, if all else fails and the bank isn't happy with the arrangement, we're able to just deed the property back over to the seller, keep the mortgage in the existing person's name, and then set up a lease option where we agree to purchase the property outright in X number of years. The next most common question that I get asked is, "How do I know you're going to keep making the payments? It's my credit on the line." And honestly, this is the question you should be asking. I would never recommend anybody do this type of deal with a buyer that they do not trust, but make sure you, you do your due diligence and that it's someone that you feel comfortable with moving forward. Additionally, what we like to try to do is set up a loan servicer who takes the money out of our account every month and pays it directly to the mortgage. This does a couple of different things. One, it ensures that you know that the mortgage is being paid every month. And two, it creates a paper trail, which leads me to my next question. How will I be able to qualify for a mortgage in the future? Well, cue the paper trail. By creating that paper trail, what we are able to do is bring that information to the new lender and show that the seller is no longer making those payments. So then the seller can remove that loan from the debt-to-income ratio. Of course, you should always work with prospective lenders on this and make sure that they are good with this approach, but we haven't had any issues with them not accepting this. And then the last question that I get asked is, what happens if you get abducted by aliens or something happens to you? What then? Absolute worst-case scenario, if something happened to the buyer, the seller would be able to go through the foreclosure process and get the house back. I have heard, although thankfully I have never been party to a foreclosure, that the process is much easier because of the paperwork and the way that it is set up. It is a lot easier to foreclose than the traditional bank foreclosure process. Additionally, most times, the seller is actually in a better spot. I always say this is best-case scenario for the seller because here's what happens. We as buyers, we come in, we catch up arrears, we pay closing costs, we pay the agent in most cases if the home is listed on market, and so we're a lot of money into it. So obviously we're going to do everything in our power to not lose this property. But additionally, because we're catching up the payments, a lot of times the seller is actually in a better situation. Their payments are caught up, their credit
