Re-Selling A House Currently Held Subject To As Subject To
Member since 2023 · 42 posts · 13 votes
Re-Selling A House Currently Held Subject To As Subject To
4 Replies
Hey Brian,
Here are some key considerations if you're looking to re-sell the property under the same "subject to" arrangement:
Due-on-Sale Clause: Most mortgages have a due-on-sale clause, which means that the lender can demand full repayment of the loan if the property is sold or transferred to a new owner. When you sell a property "subject to" the existing mortgage, technically, this clause could be triggered because ownership is transferring to a new entity or individual. However, enforcement of due-on-sale clauses can vary, and some lenders may not immediately call the loan due if payments are current and the sale does not trigger other concerns.
Disclosure to Buyer: When selling a property "subject to," it's crucial to disclose this arrangement to the buyer. They need to understand that they will be taking over responsibility for making mortgage payments while the loan remains in your name.
Legal and Ethical Considerations: Ensure that all aspects of the transaction comply with local laws and regulations regarding real estate transactions and disclosures. It's advisable to work with a real estate attorney who is familiar with subject-to transactions to navigate any legal complexities.
Risk and Liability: As the original borrower, you retain liability for the mortgage even after selling the property "subject to." If the new buyer defaults on payments or otherwise breaches the terms of the mortgage, it could impact your credit and financial situation.
Market Demand: Consider the market demand and potential buyer pool for properties sold under subject-to arrangements. Not all buyers may be comfortable or eligible to take over an existing mortgage in this manner.
Feel free to reach out directly if you have any other questions!
Ty Coutts - Aslan Home Lending 544 ReviewsHello Brian, when you own a property "subject to" the existing mortgage and are considering reselling it using the same method, there are several important considerations and potential restrictions you need to be aware of.
Due-on-Sale Clause:
Most mortgages contain a due-on-sale clause, which allows the lender to demand full repayment of the loan if the property is sold or transferred. This clause is a significant risk because if the lender discovers the transfer, they can call the loan due.
Although many lenders do not routinely enforce this clause, especially if payments are current, it is a risk you and the new buyer must understand and accept.Disclosure:
Full disclosure to the new buyer is crucial. They must understand the "subject to" arrangement, including the risks associated with the due-on-sale clause and the fact that the mortgage remains in the original borrower's name.
It’s advisable to have all agreements and disclosures in writing to avoid future disputes.Buyer’s Financial Stability:
Ensure the new buyer is financially stable and capable of making the mortgage payments. Since the mortgage remains in the original borrower’s name, any missed payments could affect their credit and lead to foreclosure.Legal and Regulatory Compliance:
Verify that reselling the property "subject to" complies with state and local laws in Texas. Consulting a real estate attorney experienced in creative financing methods can help ensure compliance and protect your interests.
Texas has specific regulations regarding real estate transactions, and certain creative financing methods might be subject to additional scrutiny.Insurance and Taxes:
Ensure that property insurance and taxes are kept up to date. The new buyer should be responsible for these payments, but you must ensure they are made to avoid issues with the lender or tax authorities.Reselling a property "subject to" can be done, but it comes with risks and requires careful planning and execution. Consulting with professionals, fully disclosing all terms to the new buyer, and ensuring compliance with all legal and regulatory requirements are crucial steps to successfully completing the transaction. I hope this helps!
Ty Coutts - Aslan Home Lending 544 Reviews- Attorney · Austin, TX · Member since 2014 · 890 posts · 759 votes2y
Just....don't.
That sounds like a lawsuit waiting to happen.
If you must sell sub-2, cash out the underlying financing and then do it yourself. If that is something you are unwilling to do, then it sounds like you probably should not be doing it at all.
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