Common Questions and Answers for Creative Finance & Sub-to Deals

Derek Seymour • March 1, 2025

(1) How will the payments be handled?


  • Will they pay the mortgage directly or send the money to the seller to pay?
  • Will they use a third-party servicing company to ensure timely payments?


  • ANSWER: Third party servicing agent.

(2) What protections are in place for the seller?


  • What happens if the investor stops making payments?
  • Will there be a written agreement that allows the seller to make the property back if payments aren't made?


  • ANSWER: Deed in lieu Clause.

(3) What are their plans for the property?


  • Are they flipping, renting, lease-optioning, or wholesaling it?
  • How long do they intend to hold the property?


  • ANSWER: Renting.

(4) Is there an upfront payment to the seller?


  • Are they offering cash for the seller's equity, or are they just taking over the loan? With the Cash down payment is that above and beyond realtor commissions?


  • ANSWER: Yes, this also covers Realtor's commissions, which we support.

(5) Will the investor cover closing costs?


  • Who is paying for title insurance, attorney fees, and recording fees


  • ANSWER: Yes, covered by buyer.

(6) What's the investor's track record?


  • Have they done sub-to deals before?
  • Can they provide references?


  • ANSWER: Great, closing several properties per month.

(7) How does the due-on-sale clause factor in?


  • If the bank discovers the sale and calls the loan due, how will the investor handle it?


  • ANSWER: We will refi the loan in our name to pay off the balance.

(8) Are they setting up an escrow for taxes and insurance?


  • Who is responsible for property taxes and insurance?
  • Will insurance be transferred to an appropriate policy (e.g., landlord or investor-friendly policy)?


  • ANSWER: Buyer will be responsible for taxes and insurance.

(9) How will this affect the seller's credit?


  • Will this impact their ability to get another mortgage in the future?


  • ANSWER: Should not, escrow statement and Hud-1 show transfer of property.

(10) Is there a written agreement protecting both parties?


  • What legal documents will be used? (e.g., purchase agreement, subject-to addendum, performance mortgage)


  • ANSWER: Purchase agreement & Sub-to addendum.