What a Legitimate Subject-To Buyer Looks Like
They close at a title company, every time. They fund a third-party servicer at closing. They carry reserves for a due-on-sale call. They sign a performance mortgage giving you the right to take the property back on default. And they can name prior sellers who will take your call.
They also tell you the downsides before you ask. A buyer who says there's no risk is either inexperienced or not being straight with you.
Nine Questions to Ask Before You Sign
How many subject-to deals have you closed in Texas, and can I have three seller references? Which title company will we close at? Which servicer will collect and remit? Will you sign a performance mortgage? What are your reserves if the lender calls the loan?
Will you name me as additional insured on the hazard policy? Who pays the arrears and closing costs? What's your exit — refinance, resale, or hold? And what's the target date for getting my name off the loan?
A serious buyer answers all nine in one sitting.
Red Flags
Pressure to sign today. A closing at a kitchen table instead of a title company. Refusal to use a third-party servicer. No down payment at all. A newly formed LLC with no track record and no personal guarantee. Vague answers about what happens if the lender calls the loan.
Any of these on their own justifies walking away. This is your credit for the next several years.
How We Structure Our Purchases
We close at a Texas title company with full title insurance, fund a licensed third-party servicer at closing, sign a performance mortgage in the seller's favor, name the seller as additional insured, and hold reserves against a due-on-sale call. Our San Antonio case study shows the numbers on a real deal.
If subject-to isn't the right structure for you, we'll say so and point you to owner financing, a formal assumption, or a straight cash sale.