In this Q&A Thursday video, Chris Prefontaine explains the mechanics of "subject‑to" real‑estate transactions, where a buyer acquires a property while the existing mortgage remains in the seller’s name. He illustrates the concept with a real‑world Cape Cod divorce case, describing how the parties used a sub‑to structure, caught up arrears, and kept the loan in the original borrower’s name. The video then answers two common questions: (1) how to avoid the due‑on‑sale clause, which he recommends handling through a properly drafted trust and an attorney experienced in sub‑2 deals; and (2) whether transferring the deed stops the capital‑gains exclusion clock, confirming that the 3‑year ownership requirement for the primary‑residence exclusion is halted once the deed is transferred, regardless of the loan staying in place. Chris stresses the importance of using specialized attorneys (linking to a network covering 32 states) and following the standardized purchase‑and‑sale agreements from the QLS Home Study Course. He also promotes the QLS program, the attorney referral portal, and upcoming live events, while reminding viewers to consult their own CPA and attorney for personalized advice.
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You can still purchase properties right now for anywhere between 0% and 5 or 6% interest rate. Okay. Welcome to this week's Q&A Thursday. I'm going to combine 2 questions we got this week, guys. We got questions regarding sub-to deals. And if you're new to the, to the station, new to real estate, subject to just means you're buying a property subject to the existing loan staying in place. You're not assuming it. That means you apply for it and it's on your personal credit and you pledge your assets, all that good stuff. No, you're buying the property subject to the loan staying in their name. And I'll give you a quick example and then I'm going to tell you the 2 questions that came in because they're sort of related. We had a couple in Cape Cod area, resort area, that got a divorce. One was on the deed, one was on the mortgage. That was not an amicable divorce. So my son-in-law and partner Zach had to work this deal and work both ends of it. You couldn't have them both on the phone together. They want to kill each other. They were behind $4,100. We were able to catch up the arrears because we found a buyer with $41,000 payday 1. So we caught up the arrears for $4,100 and we got the deal done. The deal to this day is still in their name as far as the loan is concerned. One of the spouses had their name on the loan and of course we own the property. Now, the 2 questions that came in were, were as follows. Now, please understand, I'm not an attorney and I'm not an accountant. I'm going to give you always What we do, you need to check this with your attorney and your CPA. One question was, how would you avoid the due-on-sale clause with a sub-to deal? And it's the biggest question I get everywhere else. This podcast, I figured, okay, I might as well put it on the YouTube Q&As. Second, related to this was when I'm buying a sub-to deal, if the deed transfers at that time, does that stop the clock for the seller if they are concerned about capital gains. Now, that begs an explanation, too. So very briefly, again, I'm not a CPA. You've got to live in your property as a primary residence for the last 2 or 5 year lookback. So in other words, if you lived there for 10 years and you leave, the term can't be more than 3 years. If we're doing a lease purchase with you or any deal with you, you've got to transfer that deed before the 3 years is up. That's why a lot of the sandwich leases we do are 36 months or before because they've been gone. Once it hits 36 months, they're going to lose their, their one-time exclusion to not get capital gains on their primary, which is $250,000 as of the time of this filming. I think single, single file or joint file with your spouse, $500,000 you get to exclude from profit. So you don't want to have them go past 3 years that you're doing them a disservice unless they know about it and the taxes is insignificant. So let me answer both those questions best I can. First of all, how you avoid a due-on-sale clause is you have an attorney properly paper— is what I call it— paper the deal. We do it in a trust. And because the Guy Saint Germain Act in '82, I think it was, the attorney will advise you to put that in a trust properly and properly protect the seller. There's a way to do that. I've had sellers call the attorney to get comfortable with this. Who does this? That particular one I'm referring to is in Florida, not New England. Well, we've got attorneys that do this in 32 states, guys. So I could go into this whole legal CPA thing. But how you avoid doing sale clauses, you do it properly. You hook up with our attorney. Well, let me give you the link if you want to hook up with him. His name is Steve. It's with First National Title. They're in 32 states as of now, I think. And you can go to smartrealestatecoach.com/attorney. You do have to pay an entry fee. I think it's like a few hundred bucks and then you're in. You can be their client. They just control it coming through our community. Not sure where to get started? Go to smartrealestatecoach.com/getgoing for free books, strategy calls, and a whole bunch more. We're going to help you get going the wicked smart way. We've been after this for over a decade doing exactly that. The second piece of that, if someone's in a home, let's say you've got a sandwich lease going on and it's approaching that 3-year mark where they've been gone. So 2 out of 5 years they're going to be violated in a few days or months, could you then change that deal from a lease purchase to a sub-to, taking the deed? When the deed transfers, the clock does stop ticking. It doesn't matter if there's a loan in place. So the answer to that question is yes. The stop— the clock stops ticking when that deed transfers. And that is one good strategy to use if you have a sandwich lease and by chance the buyer couldn't cash it out or the buyer defaulted, whatever, and you're going, oh shoot, the buyer was going to get whacked on the big capital gains here. Transfer the title, do a proper closing with a proper attorney, have the settlement statement, etc. Don't just do a quitclaim deed. My opinion. I'm not an attorney. Okay, so that takes care of how do you avoid it? Use the right attorney who does thousands or tens of thousands of these, not an attorney that's never done it, was going to tell you you can't do it. We've had that crazy, guys, 5 or 6 times in the last year. I've had students come to me, Wicked Smart community members, associates say, hey, Chris, this attorney told me in such and such state we can't do that there. Or it's illegal here. Crazy stuff. So all we did is found an attorney who does that, specializes in that, in that area. If you guys are looking for attorneys, use that link I gave you because we do deals every week, every month, sub-2. You got to do them properly. You're going to get yourself and/or the seller in trouble. Just do it properly. Our agreements that are in the documents section of the QLS Home Study Course, there's a purchase and sales agreement for owner financing. There's a purchase and sales agreement for sub-2 with all the disclosures in it. It's been built over the years and there's a purchase and sales agreement that combines sub-2 and owner financing because you're going to do what we call a hybrid deal. Sometimes it's all in there. And if you don't have the QLS program yet, man, oh man, you got to be living under a rock because I've been yelling about this for, I don't know, since 2017. We created it in '16. You need to get the QLS home study course, guys. It's been, it's been revised 4 times. That's painful. I'm not going to say never, but I have not personally seen another educator in the real estate space doing over courses like we do. They just put it out there and then you, you hope that it's okay when you buy 10 years later. We're in 4.0 and it came out in '16. Do the math. That's every few years we do. We did a revision and it's painful to go through it. So make sure you grab that on our website. I think it's smartrealestatecoach.com/QLS, but if it's not, you'll find it on the website, I promise you. All right. We'll see you next week on the next Q&A Thursday. Keep them coming, guys. Send an email to support@smartrealestatecoach.com and we will read your questions on this next video. Or if it's more personal, we'll get back to you by email. Make it a great week. Hope to see you at the next QLS Live event in Boston, October 25th. I think it's the 6th and 7th. Go to qlslive.com.
