Selling primary home subject-to

[Meghan Rusen]

Hi all! Looking for some advice...

My husband and I have been in our current home for almost 4 years.  We are moving out of state in January (from Louisiana to North Carolina) and will need to sell our home.  We have friends that have expressed interest in buying it as an investment property and have discussed a sale price with them.  Due to current interest rates, they're hesitant to take out a mortgage on it so I mentioned the possibility of doing subject-to and they liked the idea but asked us for some time to think about how they would like to proceed.  We refinanced in 2021 so our interest rate is 2.875% and would have $85-90,000 in equity in the home.  We definitely need the cash from the equity for our move out of state to put into our next primary residence and they would be able to give us a payment for the equity up front and then take over the existing mortgage. 

Essentially I am curious if anyone with experience with subject-to deals would offer some guidance on the best way to proceed if we go this route.  What would be the best way to structure a deal?  I'm worried about the due-on-sale clause.  I've heard that mortgage companies rarely enforce this as long as the mortgage is being paid but I'm concerned that it still might happen.  Is this too risky?  Any advice would be appreciated! 

Thank you!

[Tim J.]

The risk you have is with not controlling the property or payments.  You are on the hook for the mortgage even though you will have no control over the property.  Unless you're in dire straights I think "subject to" is an awful thing for sellers.

Basically your credit rating is held hostage/under the control of another person and that person has lots of risks. 

Be careful before you do such a thing