Due on Sale

For all of you doing lease/options, lease/purchases, or sub to’s, do any of you acquiring property this way (where your sellers have mortgages) explain to the sellers what could happen and what would you do if it does happen. Do you have a contingency plan? Also if you are selling this way and have mortgages on your properties - what is your contingency plan there should the note be called? I understand that this happens infrequently, but it is one of the risks. I think we all realize this but what plans do you keep in place for the magic moment?


Even though the “Due on Sale” clause is specified, unless the mortgage is in default, it will not be called. The mortgage company wants their money and doesn’t even have the manpower to check.

Thanx LaLa,

I believe I have recognized that, my question is if you are buying from someone - do you inform the seller of the risk that the Loan may be called? and, wether you do or not do you have a contingency plan in case it is called due?

Also the reverse - when you are selling - do you have a contingency plan in place in case your loan is called due?

It is only fair to mention this clause and the risk involved. It is our duty to let the seller know what can happen. Being honest and upfront can save from a lawsuit later. Having a plan if this comes up is only smart business but I don’t think we need to worry too much about this. We just need to be aware and know what to do. Then move on. This conversation is a good reminder. Thanks.


When making a deal with the Seller, You want them to contact the mortgage company to inform them that the house is turning into a rental. That way the mortgage company isn’t surprised on the change of address etc. This will protect the DOS from being affected! The owner still owns the house. Everyone is happy during the transaction with ALL parties!!!

Hope this helped!!!

Good Luck!!!


i don’t get it. i thought that the sellr is no longer the owner. the deed is transfered therefore the mortgage co. would know once the transfer took place. maybe i’m wrong. correct me if i am

you may be the owner, but the sellers Lender has it’s interest against the title since the sellers financing remained in place until you cash that lender out.


thanks for clearing up but i still would like to know if the transfer of the deed lets the mortgage co. know FOR SURE that the owner no longer owns the property, therefore telling them it will be rented out is not really neccesary

I think if they do find out - you don’t want them to find out that way. In a previous post it was suggested that the seller inform the lender that it is rented so it isn’t a surprise to them.

Perhaps those Lenders that escrow the taxes and insurance can find out easier than those that don’t pay they taxes with their mortgage. This I am not sure of…Any Help?