The Seller's Situation
A teacher in her mid-40s, divorced two years prior, had been awarded the family home in the divorce decree along with full responsibility for the mortgage. The home was a 3-bed, 2-bath single-story in the Helotes / NW San Antonio corridor (Bexar County, Northside ISD).
Her income alone covered the payment, but barely. When her mother needed care 200 miles south, she had to relocate. She listed with an agent for 45 days at the Zillow estimate — three showings, one lowball offer, no contract. The clock ran out before she had to drive south. She called us.
The Numbers
Original purchase: $295,000 in March 2021. Down payment: 5%. Loan amount: $280,250. Rate: 3.125% on a 30-year conventional fixed.
Current balance at the time of our call: ~$256,000. Estimated retail value: $315,000–$325,000. Monthly P&I + tax + insurance: $1,892.
After-repair value if updated (paint, flooring, kitchen): $345,000. Repairs needed: ~$22,000. A pure cash offer at 75% of ARV minus repairs would have been roughly $237,000 — meaning the seller would have had to bring ~$19,000 to closing after the mortgage payoff. She didn't have $19,000.
Why a Conventional Sale Failed
Listed at $310,000. The home needed cosmetic work — popcorn ceilings, dated kitchen, brown carpet. Buyers willing to accept that condition expected to pay 2024 prices, not 2021 prices. Buyers willing to pay the listing price expected a move-in-ready home.
Add a 6% agent commission ($18,600) and standard closing costs (~$8,000), and even a full-price sale would have netted her about $27,400 above payoff — but at the actual offer she got ($288,000), she would have netted roughly $1,400, after waiting another 45 days and continuing to make payments.
How We Structured the Subject-To
Sale price: $295,000 (back to her original 2021 basis, which mattered for her capital-gains math). Buyer's down payment to seller: $15,000 in cash at closing. Existing mortgage balance: ~$256,000. Buyer's seller-financed second-position note for the equity gap: $24,000 at 7% interest-only, 36-month balloon.
At closing she walked away with: $15,000 cash, a $24,000 note paying ~$140/month with a balloon in 36 months, and zero out-of-pocket. We took the property subject to her existing 3.125% mortgage. Loan servicing was set up with Note Servicing Center so she could see every payment we made each month.
The Risk Mitigations We Used
Performance mortgage in her favor — if we miss a payment, she can foreclose and take the property back. Limited POA so we can talk to the original lender about escrow and tax issues. Hazard insurance: kept in her name with us as additional insured, premium pre-paid 12 months at closing. Bexar County address change filed with the appraisal district within 5 days of closing. Title insurance: full owner's policy issued by Heritage Title.
Due-on-sale exit plan written into the contract: if her lender calls the loan, we refinance into our name within 90 days using a portfolio lender we already work with, or sell the property at retail with the proceeds paying off both her mortgage and the seller-financed note in full.
What Happened After Closing
We executed light cosmetic updates (~$8,000 instead of $22,000) and leased the property to a Lackland AFB-affiliated tenant on a 24-month lease at $2,250/month — covering the seller's P&ITI plus the seller-financed note payment with a small monthly margin.
Eighteen months in, every payment has been on time, the seller's credit score has improved by 28 points from the consistent on-time history, and we're on track to refinance the seller's mortgage out of her name (into ours) before the 36-month balloon comes due.
Why This Structure Worked
For her: cash at closing instead of a check brought to closing, a small monthly income stream, preservation of her 2021 capital-gains basis, and zero deficiency exposure.
For us: acquisition of a $315K asset with $15K cash + a $24K seller-financed note, controlling a 3.125% mortgage on a rental property that cash-flows from day one.
For the lender: a performing loan with on-time payments and an additional insured party watching the property.
This is what subject-to looks like when it works for everyone. It doesn't always — but with the right seller, right structure, and right execution, it's one of the most flexible deals in Texas real estate.