Subject-to / creative finance
You take over the seller's existing mortgage payments (subject-to) or buy on seller-financed terms, then sell or rent with terms. It works when cash offers are too low for the seller.
- Prices average $657k, where cash offers often fall short of what sellers owe.
How it works
Step by step
- Agree terms with the seller: price, who pays the existing loan, how long.
- Close with an attorney or title company that handles creative deals; record the deed.
- Use a loan servicing company to collect and make payments.
- Sell on terms (wrap or lease-option) or rent the property.
What you need
- A real estate attorney
- A loan servicing company
- Reserves for repairs and vacancies
Costs
Lower cash in, but monthly payments and long-term responsibility.
Watch out for
- The lender can call the loan due on transfer (due-on-sale clause).
- Several states regulate these deals heavily; get legal advice first.
- Protect the seller's credit: missed payments hurt them.