Subject To in Real Estate: What You Need To Know (2024)

Subject to real estate deals are a critical strategy in every real estate investor’s toolkit. Every investor must comprehend how these subject to real estate deals function and how to structure a subject to real estate deal successfully.

Subject to deals in real estate investing provide a rapid, cost-effective, and straightforward method to acquire properties without the need to navigate the complexities and expenses associated with working alongside lenders who often require a 20-30% down payment for a DCSR investor loan. 

Subject to real estate deals involve taking over the seller’s current mortgage payments without the need to use the buyer’s credentials. This means assuming the responsibility for making mortgage payments, while the previous owner remains accountable to the lender on paper. Understanding the dynamics of subject to deals, the potential risks involved, and the benefits for both buyers and sellers is crucial for real estate investors.

Key Takeaways:

  1. Subject To real estate deals in real estate involve buying a property subject to the current mortgage, where the investor takes over mortgage payments while the seller remains financially responsible.
  2. Benefits of Subject To real estate deals include buying properties by taking over low-interest rate mortgages, and being able to acquire properties with little to no money down.
  3. Risks associated with Subject To deals include the Due-On-Sale Clause and the need for thorough due diligence and legal protections for both buyers and sellers.

What is Subject To Real Estate Investing?

Understanding the Basics of Subject To Transactions

To understand Subject To transactions, investors must grasp the concept of taking over a property subject to the existing mortgage. This means buyers agree to make mortgage payments without officially assuming the loan, allowing them to avoid the typical lender processes. By continuing payments, investors gain ownership and sellers benefit by either avoiding foreclosure, the ability to sell their houses in low equity situations, and the ability to sell should their agent not find serious offers on Zillow or

All parties should be aware of the potential risks involved in Subject To real estate deals, notably the Due-On-Sale Clause. This clause allows lenders to demand repayment of the full loan if the property is sold.

However, most lenders do not enforce this clause if payments are made on time, reducing the overall risk for both parties involved. It’s crucial to property set up the transaction as the devil lies in the details and as long as payments are being made and the paperwork was done correctly the due on sale clause rarely gets even called by the lender.

The Legal Framework Surrounding Subject To Real Estate Deals

Any investment involving Subject To transactions should be conducted within the legal framework set for real estate agreements. Sellers could face risks such as losing their home or lower credit scores if buyers default on payments. It is imperative for sellers to work with trustworthy investors who are subject to experts and know how to overcome any potential risks such as the due on sale clause. 

Comparing Subject To to Traditional Financing Methods


Subject To

Enables buyers to acquire properties with little to no upfront costs by taking over the seller’s mortgage payments. The buyer is not required to undergo extensive lender processes as no new debt is created.

Traditional Financing

Requires buyers to undergo extensive lender processes and often a 20-30% down payment is required.

Financing methods play a crucial role in real estate investing decisions. Subject To transactions offer buyers the advantage of minimal upfront expenses compared to traditional DSCR financing methods. While traditional financing involves stringent processes and significant down payments, Subject To deals provide an alternative route that can prove beneficial for both buyers and sellers in varying circumstances.

The Difference Between Subject To Real Estate & Mortgage Assumption

Now, let’s investigate the key differences between Subject To Real Estate deals and mortgage assumptions in real estate transactions. Understanding the nuances of each option is crucial for investors navigating the complex terrain of property acquisitions.

Defining Mortgage Assumption

Defining mortgage assumption is necessary in grasping its dissimilarities from Subject To arrangements. In a mortgage assumption, the buyer takes over the existing homeowner’s mortgage, becoming responsible for the debt as well as the property. Unlike Subject To deals where the original owner remains financially liable, a mortgage assumption shifts the entire responsibility to the new buyer.

Key Differences Between Subject To Arrangements and Mortgage Assumptions

Assumption: One critical distinction lies in the liability division between parties involved. In a mortgage assumption, the buyer assumes full responsibility for the loan, while in a Subject To deal, the original owner retains financial accountability. Additionally, mortgage assumptions often necessitate lender approval, which are not required in Subject To deals.

Scenarios Where Subject To Real Estate is Most Appropriate

Subject to deals are mostly beneficial for the seller needs to sell due to a change in circumstances and in most cases one of the following scenarios of a subject to offer being the best option. 

Low Equity: The seller has little to no equity and would be forced to cut a check at closing after paying both agent commissions and closing costs. 

Failed Agent Listings: In many cases the seller has already tried selling their property with an agent but after 180 days listed on the MLS and no serious offer the listing agreement usually runs out and the real estate agent is forced to cancel the listing. 

Long Days On Market:  If the seller needs to sell and has been active on the MLS for 30+ days, a subject to offer might be a great option to quickly structure a deal with an experienced investor.

The 3 Different Types of Subject To Real Estate Deals

Despite the similarities in Subject To deals, there are actually three different types that investors can explore when looking to acquire properties without the traditional hassles of lending institutions. Each type offers unique advantages and considerations for buyers and sellers in the real estate market. After understanding these distinctions, investors can choose the most suitable approach for their investment strategy.


Cash-to-Loan Subject To

One way to approach a Subject To deal is through the Cash-to-Loan method. In this scenario, the investor pays the seller the difference between the current property value and the outstanding mortgage. For instance, if a property is valued at $125,000 and the seller owes $100,000 on the mortgage, the investor would pay $25,000 in cash to take over the mortgage payments and become the new owner. This type of deal allows investors to acquire properties without the need for extensive loan processes or upfront costs and the seller is often able to walk away with more cash at closing compared with listing the property on the MLS with a real estate agent.

Subject To With Seller Carryback

Different from the Cash-to-Loan approach, the Subject To With Seller Carryback structure involves the seller financing the remaining part of the purchase price. This arrangement, also known as a hybrid subject to structure which is part subject to and part owner financing. 


This hybrid structure allows for flexibility in payment structures and can benefit sellers who are willing to work with buyers to achieve a successful transaction. An investor may find this method advantageous when looking to secure a property with minimal upfront expenses.

Wrap-Around Subject To

The Wrap-Around Subject To deal offers a unique financing approach where the interest rate on the loan is adjusted based on the existing mortgage terms with an additional premium. Sellers who opt for this type of agreement may request a higher interest rate from the investor to accommodate their existing mortgage terms. While less common than other Subject To methods, the Wrap-Around deal allows for negotiation on interest rates, particularly beneficial when market conditions impact the overall financing structure of the property. 


With various types of Subject To deals available in the real estate market, investors can choose the approach that aligns best with their investment goals and risk tolerance. Each type carries its advantages and considerations, providing opportunities for buyers and sellers to engage in mutually beneficial transactions. By understanding the nuances of Cash-to-Loan, Subject To With Seller Carryback, and Wrap-Around Subject To deals, investors can make informed decisions that optimize their real estate investment strategies.

The Benefits (For Buyers & Sellers) of Subject To Real Estate Deals

Benefits For Buyers/Investors:

Keep in mind that Subject To deals offer significant advantages for buyers and investors in the real estate market. One key benefit is the ability to acquire properties without the need for a new loan and often at lower interest rates compared to the higher DSCR loan rates. 

This means saving on origination fees, appraisal costs, and other expenses associated with traditional mortgage processes. Additionally, buyers can take over existing low-interest rate mortgages, potentially securing better terms than if they were to obtain a new DSCR investor loan. This strategic approach allows for property acquisition with little to no money down, facilitating faster and more cost-effective transactions.

Moreover, Subject To deals offer an expedited closing process, bypassing the complexities typically involved in dealing with lenders as no appraisals and underwriting process is needed. With the opportunity to swiftly secure properties at lower interest rates, buyers and investors can optimize their real estate portfolios efficiently. Overall, these benefits make Subject To deals an attractive prospect for those looking to maximize returns in the real estate market.

It’s crucial for buyers and investors to leverage the advantages of Subject To deals responsibly. By understanding and capitalizing on the potential savings, improved financing terms, and expedited acquisition process, investors can strategically expand their real estate holdings and enhance their investment portfolios.

Benefits For Sellers:

Acquisition with the Subject To approach offers several advantages for sellers in varying circumstances. Firstly, sellers can avoid the risk of foreclosure or bankruptcy by swiftly transferring property ownership to buyers willing to take on the existing mortgage payments. This immediate relief from financial distress can help sellers stabilize their situations and prevent potential credit score repercussions as a foreclosure stays on the seller’s credit report for 7 years, making it impossible in that time to buy a car, get approved for a rental property, and especially prevent the sellers from buying another property.

One notable benefit for sellers is the ability to sell their properties quickly especially in low equity situations without the need for extensive repairs or renovations. By entering into a Subject To agreement, sellers can offload properties efficiently while ensuring ongoing mortgage payments. Additionally, the potential for upfront payments from buyers can provide sellers with immediate financial support, addressing urgent cash flow needs.

Lower risks of property loss, credit score impacts, and liability concerns are key advantages for sellers in Subject To deals. By collaborating with trustworthy investors, securing detailed agreements, and understanding the terms of the transactions, sellers can minimize risks and optimize the benefits of this innovative real estate strategy.

Check out our comprehensive Subject to sellers guide for 2024 here.

The Risks (For Buyers & Sellers) of Subject To Deals

Many risks come with Subject To real estate deals, both for buyers and sellers. It’s crucial to understand the potential pitfalls associated with this unconventional type of real estate transaction.

Risks For Buyers

The most common risk for buyers in Subject To deals is the Due-On-Sale Clause, which allows the lender to demand full loan repayment if the property is sold. While most lenders do not typically enforce this clause, it remains a potential threat that buyers should be aware of. It’s important for buyers to have a comprehensive understanding of the terms of the deal and to have contingency plans in place to address any potential issues that may arise.

Experienced creative real estate investors should have solutions for any potential risk such as the due on sale clause. 

Risks For Sellers

Sellers engaging in Subject To deals also face risks, if the buyer fails to make mortgage payments on time. This situation could lead to foreclosure, damaging the seller’s credit and sellers must carefully vet potential buyers and ensure they are financially capable of fulfilling their obligations. 

Another concern a few sellers face is if they want to buy another property shortly after selling their initial house with a subject to transaction. The DTI requirement however can be overcome by explaining the subject to transaction to the new lender and in most cases that suffices to adjust the DTI and approve the seller for a new mortgage and in some cases the buyer needs to get on the phone with the new underwriter and potentially furnish a few documents in order for the seller to get approved. After 12 months of close of escrow lenders automatically adjust the DTI requirement by 100%.

Mitigating The Risks of Subject To Real Estate

Once again, mitigating the risks associated with Subject To deals is crucial for both investors/buyers and sellers. Strategies for investors/buyers involve ensuring all details are documented in writing, including the terms of the deal and repayment agreement. 

Additionally, obtaining insurance for the property to protect against unforeseen circumstances is a wise move. Conducting thorough due diligence by researching the property, market, and state laws can provide added protection for investors entering into a Subject To agreement.

Strategies for Investors/Buyers

On the other side, tips for sellers in a Subject To deal can help mitigate potential risks. Working with a trustworthy investor who has a proven track record is imperative. Similar to buyers, sellers should ensure all aspects of the deal are clearly outlined in writing, protecting both parties involved. 

Seeking legal advice and understanding state laws pertaining to real estate transactions can also help sellers navigate the process successfully.

Tips for Sellers

Insurance is a crucial consideration for sellers in a Subject To deal, as it can provide added protection in case of default by the buyer. Sellers should also ensure all agreements are documented thoroughly and seek legal counsel to review any contracts or agreements. After all, having a clear understanding of the risks and rewards involved in a Subject To deal is imperative for both buyers and sellers alike.

How to Find Subject To Real Estate Deals

Networking with Real Estate Professionals

One of the most effective ways to find Subject To real estate deals is through networking with real estate professionals. Building relationships with real estate agents, brokers, and property managers can help you gain access to off-market opportunities. 

Attend real estate meetups, join local real estate investment associations, and connect with professionals in your area to uncover potential deals.

Real estate professionals often have insider knowledge of properties or motivated sellers who may be open to Subject To arrangements. By expanding your network and fostering relationships within the industry, you increase your chances of finding lucrative investment opportunities.

In the real estate market, relationships are key. Leveraging your connections with real estate professionals can lead to exclusive access to Subject To deals that others may not have access to.

Marketing Strategies for Uncovering Subject To Opportunities

One effective marketing strategy for uncovering Subject To opportunities is direct mail campaigns targeted towards motivated sellers. Sending out letters or postcards to homeowners facing foreclosure or financial difficulties can help you identify potential deals. Include a compelling offer in your marketing materials to attract sellers interested in fast solutions.

Another strategy is to utilize online advertisements such as Google PPC, Meta Ads, and Youtube Video Ads to reach a broader audience of potential sellers. Creating targeted ads that highlight the benefits of a Subject To deal can attract homeowners looking to sell their property quickly and conveniently.

Implementing strategic marketing initiatives tailored towards distressed homeowners can increase your chances of uncovering Subject To opportunities and generating leads for profitable real estate investments.

Online Platforms and Resources for Subject To Deals

Online platforms such as or can be valuable resources for finding Subject To deals. Browse through online listings of properties or join online communities dedicated to real estate investing to connect with sellers interested in Subject To arrangements.

Utilize online tools and resources designed for real estate investors to streamline your search for potential deals. From property databases to analytical tools, online platforms offer a wealth of information that can help you identify lucrative Subject To opportunities and make informed investment decisions.

By leveraging the power of online platforms and resources, investors can access a wide range of opportunities and stay ahead in the competitive real estate market, securing profitable Subject To deals.

Subject To Real Estate Contract

Essential Clauses in a Subject To Contract

Despite the benefits of Subject To deals in real estate, it is crucial for investors to have a solid contract in place to protect both parties involved. Any Subject To contract should include crucial clauses that outline the terms and conditions of the agreement. These clauses typically cover details such as the transfer of title, the responsibilities of each party regarding mortgage payments, and clauses related to the Due-On-Sale Clause.

Any Subject To contract should clearly outline the timeline for the transfer of ownership, the payment schedule for the buyer to the seller, and any potential consequences of defaulting on the mortgage payments. Including these crucial clauses in the contract can help prevent misunderstandings and protect both the buyer and the seller in the transaction.

It is crucial to consult with a real estate attorney when drafting a Subject To contract to ensure that all legal requirements are met and that both parties are adequately protected throughout the deal. By including these crucial clauses, investors can minimize risks and ensure a smooth transaction process.

In addition to the purchase agreement the investor also needs a Subject To Addendum and a Seller Acknowledgement document which has the most important disclosures to the seller. Without these two documents most title companies will refuse to facilitate the title and escrow work.

Negotiating Terms in the Subject To Agreement

Negotiating the terms of a Subject To agreement is a critical step in the real estate transaction process. Negotiating terms such as the purchase price, the amount of cash paid upfront, and the repayment schedule for the seller can significantly impact the success of the deal. It is important for both parties to clearly communicate their expectations and reach a mutually beneficial agreement.

Negotiating the terms also involves discussing the transfer of title, the responsibilities of each party, and any potential risks associated with the transaction. By engaging in transparent and open negotiations, investors can ensure that all parties are satisfied with the terms of the agreement and that the deal progresses smoothly.

Before finalizing the Subject To agreement, it is recommended to carefully review all negotiated terms with the help of a real estate professional. By negotiating terms that are clear, fair, and in line with the goals of both parties, investors can increase the chances of a successful transaction and minimize any potential conflicts or misunderstandings.

Closing the Deal: Steps and Considerations

Closing the deal on a Subject To real estate transaction involves several steps and considerations that both buyers and sellers should be aware of. Agreement on the terms of the contract is critical before moving forward with the closing process. It is crucial to ensure that all terms and conditions are clearly outlined, understood, and agreed upon by both parties.

Subject to the agreement being in place, the next steps in closing the deal include signing the necessary documents, transferring ownership of the property, and making arrangements for the ongoing mortgage payments. It is crucial for both parties to adhere to the terms of the contract and fulfill their responsibilities to avoid any potential disputes or legal issues down the line.

Financing Subject To Deals

Once again, understanding different financing strategies is crucial in successfully navigating Subject To deals in real estate. Assessing the various options available can help investors make informed decisions and maximize their returns on investment.

Assessing Different Financing Strategies

Assessing different financing strategies for Subject To deals involves consideration of factors such as interest rates, repayment terms, and overall cost. Investors must weigh the pros and cons of utilizing their own capital versus seeking external financing to determine the most financially viable approach for each deal.

Private Money 

Private money lenders are common sources of financing for real estate investors engaging in Subject To deals. These lenders offer alternative funding options with higher interest rates and shorter repayment terms, but they can provide quick access to capital, making them attractive choices for investors looking to close deals swiftly.

Managing a Subject To Property

Responsibility for Mortgage Payments and Property Taxes

For any investor taking on a Subject To property, it is crucial to understand the responsibilities associated with managing the mortgage payments and property taxes. As the new owner of the property, you are responsible for making timely mortgage payments to the lender to avoid any risk of default. 

Additionally, property taxes are also your responsibility, as they directly impact the financial health of the investment. It is important to stay on top of both payments to ensure the property remains in good standing.

Any negligence in meeting these financial obligations can lead to serious consequences, including potential foreclosure by the lender. Keeping meticulous records of payments and staying proactive in budgeting for these expenses is key to successfully managing a Subject To property.

Failure to uphold these responsibilities can not only result in financial loss but also damage your reputation as an investor in the real estate market.

Dealing with Tenants or Lease-to-Own Agreements

With a Subject To property, dealing with tenants or lease-to-own agreements adds another layer of complexity to your investment strategy. Proper screening of tenants and effective communication with them can help maintain a positive landlord-tenant relationship.

Subject to your investment goals and strategy, you can choose to rent out the property or explore lease-to-own agreements to generate passive income. It is important to have a clear understanding of your objectives and know the highest and best use for the property before opening the escrow process.

Exit Strategies for Subject To Investments

Investments in Subject To properties require careful consideration of exit strategies to maximize profitability and minimize risks. Having a solid plan in place for selling or refinancing the property at the right time is crucial. Whether you choose to sell the property for a profit or refinance to secure a better interest rate, it is important to stay informed about market trends and conditions.

By carefully planning your exit strategies and staying proactive in monitoring market dynamics, you can ensure a successful and profitable outcome for your Subject To investment.

Legal and Ethical Considerations

Legal: When engaging in Subject To real estate deals, it is crucial to navigate the ethical considerations involved. Buyers must ensure that they are transparent with sellers about the risks involved, including the Due-On-Sale Clause. It is imperative to have all agreements in writing to protect both parties in case of any disputes or misunderstandings. Additionally, buyers should work with trustworthy investors who have a track record of successful deals.

Regulations: Staying informed about real estate laws and regulations is paramount in Subject To deals. Each state may have different regulations regarding these types of transactions, so it is vital to research and understand the legal requirements in your area. 

Ethical: Ethically, it is crucial for both buyers and sellers to act in good faith during Subject To deals. Sellers should work with reputable investors and ensure they understand the terms of the agreement. Buyers should prioritize the seller’s best interests and maintain open communication throughout the transaction. 

By adhering to ethical standards and legal guidelines, both parties can navigate Subject To deals successfully.

Case Studies and Examples

  1. Case Study 1: Investor A successfully acquired a property valued at $150,000 through a Subject To deal. The seller owed $140,000 on the mortgage, and Investor A paid them $10,000 in cash to take over the payments. The property was then rented out, generating a monthly income of $1,500.
  2. Case Study 2: Investor B negotiated a Subject To deal for a property worth $200,000 with an existing mortgage of $150,000. The investor paid $50,000 to the seller and started making mortgage payments. After minor renovations, the property was sold for $250,000, resulting in a profit of $50,000.
  3. Case Study 3: Investor C took over a property through a Subject To agreement where the seller was facing foreclosure. The investor made $20,000 upfront payment to the seller and continued with mortgage payments. The property was refinanced after a year, allowing Investor C to cash out $40,000 in equity.

Subject To Real Estate Summing up

Now that you have explored the intricacies of Subject To real estate deals, it is clear that this strategy offers both buyers and sellers a unique opportunity to navigate property transactions in a fast, efficient, and cost-effective manner. By understanding the concept of taking over a property subject to the existing mortgage, investors can capitalize on properties without the burdens of traditional loan processes and closing costs. Sellers, on the other hand, have the chance to avoid foreclosure or financial distress by selling subject to the existing mortgage staying in place and having the buyer continue to make monthly payments on their behalf. 

However, as with any real estate investment strategy, there are risks involved, primarily centered around the due-on-sale clause for both buyers and sellers. Mitigating these risks through thorough research, documentation, and ensuring both parties uphold their end of the agreement is crucial in ensuring a successful Subject To deal. By following best practices, investors and sellers can navigate these transactions smoothly and capitalize on the benefits of obtaining properties at a discount, taking over low-interest rate mortgages, and closing deals quickly.

Therefore, the Subject To real estate investing approach provides a valuable tool for investors seeking discounted properties and sellers looking to avoid financial hardship. By understanding the nuances of these deals, mitigating risks, and following a well-defined process for finding, negotiating, and closing transactions, both parties can benefit from the advantages offered by this strategy. With the right knowledge and precautions in place, Subject To deals can be a win-win scenario for all involved in the real estate transaction.

Subject To Real Estate FAQs

Q: What does it mean to buy a property Subject To the current mortgage in real estate?

A: When you buy a property Subject To the current mortgage, you take over the payments on the existing mortgage while the original owner remains financially responsible to the lender.

Q: How does a Subject To deal benefit real estate investors?

A: Subject To deals benefit investors by allowing them to acquire discounted properties without involving lenders or title companies, potentially saving on expenses and time.

Q: What are the different types of Subject To real estate deals?

A: The three main types of Subject To deals are Cash-to-Loan Subject To, Subject To with Seller Carryback, and Wrap-Around Subject To. Each has its own financing structure and benefits.

Q: What are the risks involved in Subject To deals for both buyers and sellers?

A: The main risk for both parties is the Due-On-Sale Clause, which can potentially trigger the lender to demand full repayment of the loan. Other risks include loss of property for sellers and potential credit score impact.

Q: How can buyers and sellers mitigate the risks associated with Subject To real estate deals?

A: Mitigate risks by getting everything in writing, obtaining insurance, conducting thorough due diligence, understanding state laws, working with trustworthy investors, and ensuring clarity in all terms and agreements.

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