Closing a sub-2 deal

Contracted to purchase 4/2.5 home on 4 acres subject-to. The owner gave us 36 months to close the deal. We are about done with rehab and will put house up for sell in about 2 weeks. Purch Price: approx. 189k. Sell price: 229k.

When we write up contract for new buyer - what is the simplest way to close with no hassle from the title company at closing? Do we assign the contract to the new buyer - but how do we get our 40k (minus costs)?

I ask because I’m running into title companies that feel buying ‘sub-2’ is fraud and start talking about the due on sale clause? I keep saying it won’t matter if you have an end-buyer that will basically pay the loan off - therefore, the mortgage company’s due-on-sale clause would be taken care of because of the sale!


Are you sure Sub-To is what you are trying to describe? Do you own the house (have the deed) or not?

Yes, I have the deed. I am talking about how to write the contract for the retail buyer (the person I sell the house to).

If you have the deed, you own the home.

Your contract with the buyer can be a standard contract for purchase.
Since the buyer is getting a new loan, the old loan will be paid off at
your closing with the new buyer. The new deed will be from you to your buyer.

I don’t understand the part where you said:
“The owner gave us 36 months to close the deal.”
If you have the deed, are you not already closed with them?

Yea, that’s what confused me too

The owner is giving us 36 months to keep the loan in their name. I’m sorry if I worded it wrong. I guess what I’m asking is - have you run into any problems with the title company, when you bought a home as a subject-2, during the closing to the retail buyer? Did you use a title company or attorney to close? If you used a title company, which one?

I am running into closing agents at title companies that say that this type of transaction is illegal because of the due-on-sale clause on the original mortgage. Of course, I don’t agree, but I need to find the path of least resistance to get this deal done.

Hope this clears up the confusion.

I’m still confused why your are calling title companies. Are you selling this conventionally?

If you have a retail buyer purchasing this property sub-2 existing financing you should not be talking to a title company.

The end buyer would be getting the financing within the 36 month period. Why are you arranging financing on a property you have sub-2 option on?

I think what Pamnar is saying is that when the new buyer apply’s for financing, the title work will come back as the deed being in the sellers name and the mortgage to be paid in full on schedule b of the title commitment will have someone elses name for the original mortgage.
Am I correct on this?

Yes, Ramona! I’m glad someone understands what I am asking! I have my purchase of the property done. I am talking about when I have my retail buyer in place - is there anything that I can do to facilitate a smoother closing?

Have you tried First American Title? I just sold a home retail through them that I took sub2. She tried to lecture me on the DOS, but it closed just fine.

I’ll check them out! Thanks for the recommendation!

But the previous point is still valid. It’s not your concern, it’s your buyer’s, so why are you talking to title companies?

You’re over thinking this.

Maybe I didn’t make myself clear in my original post. The last deal that I did was supposed to be a flip. I had my contracts and my retail buyer had his financing in place with a lender that did not have seasoning issues. I thought I was home free. The title company that was to do the closing said that they had no problem doing a ‘double-closing’. Well, at the last minute the title company insisted that I bring my own financing to the table to close the first transaction and then they could close the second with my retail buyer. I was able to get the financing, but I don’t want to have any ‘extra’ issues at the last minute. That’s why I’m asking is there any thing that I can do so that these types of issues won’t arise.

Hopefully, everyone can now understand why I’m asking this question - not because I’m ‘over-thinking the situation’, but because of my last experience. If there is a title company that is known for working with investors that use creative techniques, then wouldn’t it make sense to seek that company out?

I see. So you’re not selling on a contract for deed or some other type of owner financing?


Mike B,
Just curious, why do you use the tag line “It’s not legal, ethical or practical to purchase “Sub-to” in Northeast Ohio so don’t even try!” on you posts. I invest in central ohio, where all laws should be the same - they’re Ohio laws. Why would it be ethical and practical to sub-to in Columbus, but not Cleveland?

Choose one:

A. I’m a John T. Reed affiliate attempting to sell his books

B. I’m just kidding

Take your pick

I pick “C”, both of the above. LOL. ;D