Step-by-Step Guide to Completing a Subject-To Real Estate Transaction

Phase 1: Initial Assessment

1. Property Evaluation

• Review current mortgage details
  • Loan balance
  • Interest rate
  • Monthly payments
  • Payment history
  • Due dates
• Verify no foreclosure proceedings
• Check for liens or judgments
• Review tax payment status
• Assess property condition

2. Seller Qualification

• Verify seller’s ownership
• Review mortgage statements
• Check for due-on-sale clause
• Assess seller’s motivation
• Gather financial information
  • Current mortgage details
  • Property tax information
  • Insurance costs
  • HOA fees (if applicable)
  • Utility costs

3. Documentation Gathering

• Current mortgage statement
• Property deed
• Insurance policies
• Tax records
• HOA documents
• Utility bills
• Maintenance records
• Previous year’s payments

Phase 2: Due Diligence

1. Title Research

• Order title search
• Review chain of title
• Check for:
  • Liens
  • Judgments
  • Encumbrances
  • Easements
  • Restrictions

2. Mortgage Analysis

• Contact mortgage company
• Verify payment status
• Check for:
  • Escrow requirements
  • Insurance requirements
  • Payment procedures
  • Online access options

3. Property Assessment

• Professional inspection
• Market value analysis
• Repair estimation
• Future value projection
• Rental market analysis

Phase 3: Agreement Structuring

1. Purchase Agreement

• Draft Subject-To agreement
• Include key terms:
  • Purchase price
  • Down payment
  • Existing loan details
  • Payment terms
  • Transfer conditions
  • Default provisions
  • Insurance requirements
  • Tax responsibilities

2. Additional Documents

• Authorization letter for lender
• Property management agreement
• Insurance transfer/update
• Tax payment arrangement
• Deed preparation
• Power of attorney (if needed)

3. Payment Structure

• Calculate monthly payments
• Set up payment system
• Establish reserves for:
  • Taxes
  • Insurance
  • Repairs
  • HOA fees

Phase 4: Closing Process

1. Pre-Closing Tasks

• Schedule closing
• Prepare closing documents
• Arrange insurance transfer
• Set up payment systems
• Create authorization letters
• Organize property transfer

2. Closing Day

• Sign all documents
• Transfer insurance
• Exchange keys
• Provide payment instructions
• Transfer utilities
• Document exchange

3. Post-Closing

• Record deed
• Update insurance
• Set up payment systems
• Notify HOA
• Transfer utilities
• Create maintenance schedule

Phase 5: Ongoing Management

1. Payment Management

• Set up automatic payments
• Create payment tracking system
• Maintain payment records
• Monitor escrow accounts
• Track tax payments
• Document all transactions

2. Property Management

• Maintain property condition
• Handle repairs
• Pay utilities
• Manage insurance
• Handle HOA matters
• Document all activities

3. Seller Relations

• Regular updates
• Forward relevant mail
• Maintain communication log
• Address concerns promptly
• Annual review meeting

Risk Management

1. Legal Compliance

• Monitor state laws
• Review due-on-sale implications
• Maintain proper insurance
• Follow tax regulations
• Document all activities

2. Default Prevention

• Payment monitoring
• Property maintenance
• Insurance compliance
• Tax compliance
• HOA compliance

3. Exit Strategy

• Refinance options
• Sale preparation
• Loan assumption
• Property disposition
• Seller coordination

Best Practices

Documentation

• Keep detailed records
• Maintain communication logs
• Store copies of all documents
• Track all payments
• Document property changes

Communication

• Regular seller updates
• Lender correspondence
• Insurance updates
• Tax office contact
• HOA communication

Financial Management

• Separate accounts
• Regular reconciliation
• Reserve maintenance
• Payment tracking
• Expense documentation

Common Challenges and Solutions

1. Lender Issues

• Authorization problems
• Payment questions
• Insurance requirements
• Escrow matters
• Communication barriers

2. Seller Concerns

• Credit impact
• Payment verification
• Property maintenance
• Insurance questions
• Tax responsibilities

3. Property Issues

• Maintenance needs
• Insurance claims
• HOA violations
• Tax assessments
• Utility problems

Required Resources

Professional Contacts

• Real estate attorney
• Title company
• Insurance agent
• Property inspector
• Maintenance contractors
• Tax advisor

Documents and Forms

• Subject-To agreement
• Authorization letters
• Payment records
• Insurance policies
• Tax documents
• Property records

Systems and Tools

• Payment tracking software
• Document storage
• Communication system
• Property management tools
• Financial tracking