Selling Your Florida Home “Subject To”: A Guide for Homeowners

If you’re a Florida homeowner struggling to sell or keep up with mortgage payments, you might hear about a “subject-to” deal. In a subject-to real estate deal, you sell your house but keep the existing mortgage in your name. The buyer takes over the property title and promises to pay your loan each month, but the loan stays under your name after closing (The Risk Of Selling Your Home Subject To). This guide will explain how subject-to deals work in Florida, what to watch out for, and how to protect yourself. We’ll use simple language and real examples so you can make an informed decision without feeling overwhelmed.

What Is a Subject-To Deal?

In a traditional home sale, the buyer gets a new mortgage and the seller’s mortgage is paid off at closing. In a subject-to deal, the buyer does not get a new loan. Instead, the sale is made “subject to” the seller’s existing mortgage remaining in place. The deed (ownership) transfers to the buyer, but the original loan stays in the seller’s name (The Risk Of Selling Your Home Subject To). The buyer agrees to make the monthly payments on the seller’s loan going forward. Essentially, the buyer is supposed to pay your mortgage bill, even though you’re no longer the owner of the house.

Why would anyone do this? From the buyer’s side (often an investor), it’s a way to purchase a house without needing a large new loan or down payment. They can step into your loan’s existing interest rate and terms, which might be better than what they could get now (Subject-to Real Estate: A Smart Investing Strategy? - Global Florida Realty). For example, if you have a low 3% interest rate on your mortgage, a buyer would love to take over those payments instead of getting a higher-rate loan. It’s a “creative financing” method that some real estate investors use to scoop up properties quickly and cheaply (“Subject To” Transactions: Pros, Cons, and Title Considerations - Marina Title). But as the seller, it means your name stays on that debt even though you gave up the house.

How Does It Work in Florida?

A subject-to transaction in Florida follows a few key steps. First, you and the buyer sign an agreement that you will transfer ownership to the buyer without paying off your mortgage. At closing, you sign a deed over to the buyer, like a warranty deed or quitclaim deed, to transfer the property to them. However, you do not have a satisfaction of mortgage because your loan isn’t paid off – it stays open in your name. The buyer then starts making your loan payments each month after closing. They might pay the lender directly or use a third-party servicing company to handle payments.

It’s important to know that Florida law does not outright ban subject-to deals. Selling your home this way is legal, but it exists in a bit of a gray area and must be done carefully. Florida is a “judicial foreclosure” state, which means if the mortgage stops being paid, the lender has to go through the courts to foreclose on the home. That process can be slow – sometimes taking a year or more – and unfortunately, some scammers try to exploit that (The Risk Of Selling Your Home Subject To). (We’ll explain that scam later.) Also, in Florida, if the lender ultimately forecloses and sells the house for less than what’s owed, they can try to collect the remaining amount from you, the original borrower (Know Your Rights in Deficiency Judgments - Koontz & Associates, PL Real Estate, Business & Tax Law). This is called a deficiency judgment, and it’s another Florida-specific risk to keep in mind: the bank could come after your other assets or wages for the unpaid balance.

The Due-on-Sale Clause: One big concern in any subject-to deal is something called the due-on-sale clause. Most mortgages (including in Florida) have a clause that says if you sell or transfer the property, the lender can demand the entire loan balance be paid immediately. In reality, many banks don’t enforce this if payments remain on time and the loan stays current. However, the clause does give the bank the right to call the loan due. If they find out about the transfer and decide to enforce it, the buyer would need to pay off the loan or the home could face foreclosure. In Florida, that would put your credit and financial life at risk because the loan is still in your name when the bank comes knocking. To avoid triggering the due-on-sale, some investors use tricks like transferring the house into a Florida land trust or LLC before or after the sale. But there’s no guarantee the lender won’t find out. As the seller, you should be aware that this clause exists – it’s a risk factor largely outside your control.

Why Would a Florida Homeowner Consider a Subject-To Deal?

With those risks, you might wonder why a seller would ever agree to this. The truth is, subject-to deals are usually pitched to sellers in tough situations. Here are some reasons a Florida homeowner might consider it:

• Facing Foreclosure or Financial Hardship: If you’ve fallen behind on mortgage payments or can’t afford your loan anymore, a subject-to deal can be a way to avoid foreclosure on your record. The investor-buyer will bring the loan current (pay the overdue amount) and keep it in good standing, preventing the bank from foreclosing. This can spare your credit from the harsh hit of a foreclosure.
• No Equity or Underwater Mortgage: If your home’s market value isn’t enough to fully pay off the mortgage (for example, if prices dipped or you haven’t built much equity yet), selling the usual way can be hard. In a subject-to, the buyer isn’t asking you to pay off the remainder – they’re willing to take over the loan even if you have little or no equity. This lets you unload a property you can no longer afford without doing a short sale or bankruptcy.
• Need a Quick or “As-Is” Sale: Some sellers need to relocate quickly or have a house that needs repairs and won’t sell easily on the market. A subject-to investor might offer to close fast and buy the home “as is”, since they are not waiting for bank loan approvals. For the seller, it’s a faster exit.
• Receiving a Small Cash Offer: In some cases, the buyer might offer a few thousand dollars in cash at closing as an incentive. For instance, an investor might say: “We’ll take over your payments and give you $5,000 now for moving expenses.” These offers (our local sellers have been offered up to $10,000) can tempt homeowners who need cash immediately.

In summary, a subject-to deal might help you out of a desperate situation. It can be a relief to hand over a property that’s causing stress, avoid ruining your credit, or get a little cash to start fresh. But – and this is crucial – these benefits only happen if the buyer actually keeps paying your loan. The entire arrangement hinges on the buyer’s honesty and ability to pay. That’s why you must approach subject-to offers with caution and clear eyes.

Best Practices for Sellers (If You Choose to Proceed)

If you decide to explore a subject-to sale in Florida, there are some best practices to protect yourself. This is not a typical real estate deal, so you’ll want extra safeguards in place:

• Use a Real Estate Attorney: Don’t do a subject-to deal on a handshake or simple deed transfer. Always consult a Florida real estate attorney to draft and review the agreement. The contract should clearly spell out each party’s duties and what happens if the buyer misses payments. An attorney can include clauses to protect you, such as requiring the buyer to notify you of any late payments or allowing you to periodically verify the loan status. They can also ensure the documents comply with Florida law, since each county may have different recording requirements for such transfers (Subject-to Real Estate: A Smart Investing Strategy? - Global Florida Realty).
• Verify the Buyer’s Track Record and Credit: You have every right to check out the person or company offering to take over your loan. Request their credit report or financial references to see if they have a history of paying debts on time. If the buyer is an investor with other properties, ask for a list of addresses they’ve bought. Have a title company or attorney check for any foreclosure filings (lis pendens) on those properties. If they’ve done subject-to deals before and those homes ended up in foreclosure, that’s a huge red flag. A legitimate buyer should be willing to share information to prove they’re trustworthy.
• Get Everything in Writing: The agreement should include all the promises made. Key points to cover are: how and when the buyer will make the mortgage payments, what happens if they default, who will pay for property taxes and insurance, and when the loan will be paid off in full (for example, the buyer might plan to refinance or resell within a certain time). A well-structured contract should also include a specific disclosure that you understand the risks of leaving the loan in your name. Make sure you fully read and understand the agreement (with your lawyer’s help) before signing. If something discussed isn’t in writing, it won’t count later.
• Maintain Insurance Coverage: Once you transfer the deed, you’ll likely cancel your homeowner’s insurance (since you no longer own the home). However, make sure the buyer gets a proper insurance policy on the house without any gap. Florida is prone to hurricanes, floods, and other hazards, so insurance is a must (Subject-to Real Estate: A Smart Investing Strategy? - Global Florida Realty). Ideally, the policy should name the lender and even you as an additional insured party if possible. This way, if disaster strikes, the insurance will cover the damage and the loan will still be paid. Without insurance, if the house is destroyed, you’d still owe the mortgage balance – a nightmare scenario to avoid.
• Stay Informed After the Sale: Even though you’ve sold the house, you must remain vigilant as long as the loan is in your name. Arrange with the lender to continue receiving statements or at least get online access to the mortgage account. Many subject-to sellers will keep an eye on the account each month to confirm payments are being made on time. If you see a payment is missed or late, you can immediately contact the buyer to find out what’s going on. Early warning can help you take action (like possibly catching up the payment yourself to protect your credit, then dealing with the buyer through legal means). In short, don’t just trust that “no news is good news.” Actively monitor that loan.

Following these best practices doesn’t guarantee success, but it greatly improves your chances of a positive outcome. The key is to treat a subject-to sale like a serious business transaction, not a casual favor. Protect yourself as if you were the bank lending this buyer money – because in a way, you are!

Potential Risks and What Could Go Wrong

It’s important to understand the major risks you take on when selling your home subject-to. Here are the main things that could go wrong from the seller’s perspective:

• Buyer Stops Paying the Loan: This is the number one concern. You hand over your house, but the buyer might fail to make the mortgage payments on time (or at all). If they stop paying, the loan will go into default and eventually foreclosure, and it’s your credit on the line. You could end up with late payments, default notices, and ultimately a foreclosure recorded on your credit report, severely damaging your ability to get credit in the future. Remember, the bank can foreclose on you, not the buyer, because your name is still on the mortgage. You’ve given up ownership but not the responsibility for the debt. This scenario is the worst-case and unfortunately not uncommon if the buyer runs out of money or simply chooses not to pay.
• You Remain Liable, Even After Foreclosure: If the mortgage does fall into foreclosure, Florida law allows the lender to pursue you for any remaining balance after the home is sold at auction. For example, say $200,000 was owed and the house sells for $150,000 in a foreclosure sale – the bank might get a deficiency judgment for the $50,000 difference, and come after you for that money. They could garnish your wages or put liens on your other property to collect it (Know Your Rights in Deficiency Judgments - Koontz & Associates, PL Real Estate, Business & Tax Law). Meanwhile, the buyer who caused this is not on the hook for that deficiency because they were never on the loan. That risk is squarely on the original borrower – you.
• Credit and Debt-to-Income Impact: Even if the buyer does pay on time, that mortgage stays on your credit report until it’s paid off. This means it counts as your debt in the eyes of other lenders. If you try to get a new mortgage to buy another home, or apply for a car loan or credit card, lenders will see that you “owe” that mortgage every month. The loan will show up as an ongoing obligation, affecting your debt-to-income ratio. Practically, this can make it very hard for you to qualify for a new home loan while the subject-to deal is in effect . You might have planned to move and buy a new house, but find out you can’t get a mortgage because the old loan still ties up your credit.
• Due-on-Sale Clause Enforcement: As discussed earlier, the bank could call the loan due if they discover the transfer . How might they find out? Sometimes through a change in insurance policy, a notice of deed transfer, or if the buyer slips up and contacts the lender. If the bank demands the full balance and neither you nor the buyer can pay it, the bank will foreclose. This risk is hard to predict – it might never happen, or it could happen quickly. It’s another factor that puts the seller in a vulnerable position, since you can’t outright prevent the bank from exercising that right.
• Loss of Control Over Your Property: Once you sign over the deed, the house is no longer yours. The buyer could do anything with it (within legal bounds) – for example, rent it out to tenants – and you have no say anymore. Yet if things go south, you’re the one who suffers financially. This imbalance of “no control, all the risk” is at the heart of why subject-to deals are dangerous for sellers (The Risk Of Selling Your Home Subject To). If the house value goes up and the buyer eventually sells at a profit, you usually don’t get any of that gain either. You’ve effectively handed them your equity. On the flip side, if something bad happens (like property damage or liability issues), you might still get contacted since public record shows you as the past owner and the loan is yours. It can become messy.

In short, you carry almost all the risk in a subject-to sale. You need to trust the buyer completely – but even then, unforeseen circumstances (job loss, illness, economic downturns) could prevent them from paying. Unlike a normal sale where you’re free and clear after closing, here you’re tied to this deal until that mortgage is paid off. It could be years of uncertainty.

Red Flags: How to Spot a Possible Scam

Not every subject-to offer is a scam. Some are made by honest investors who fully intend to uphold their end of the bargain. However, because these deals inherently favor the buyer, they have unfortunately attracted scammers, especially in Florida’s recent market (The Risk Of Selling Your Home Subject To) (The Risk Of Selling Your Home Subject To). Here are some red flags that should make you very cautious or send you running:

• Pressure to “Just Sign the Deed” Quickly: If the person is rushing you to transfer your property to them without allowing time for review, be wary. Scammers will often say “We’ll handle the paperwork, just sign here” and discourage you from consulting anyone. Don’t ever deed your home to someone without a proper closing process and legal review. Quick-sign deeds are a big red flag.
• Promises That Sound Too Good to Be True: Be cautious if the buyer promises something unrealistic, like “We got your bank’s permission to do this” or “Don’t worry, the loan will be off your name in a month.” Some scammers falsely claim they negotiated with the lender to let them take over or pay off the loan once they have the deed. In reality, traditional lenders will not just release a borrower or allow a loan transfer to an unqualified person. Also, claiming there’s a “subject to clause that makes this legal” is misleading – no special clause magically protects you; it’s the standard due-on-sale clause they’re referencing. If the pitch includes lines that downplay the risks or legality (“the bank can’t do anything” or “this is done all the time, no risk”), that’s a red flag. A reputable investor will openly acknowledge the risks and suggest you get advice – a scammer will gloss over it.
• No Proof of Funds or Plan: Ask the buyer how they plan to afford your mortgage payments. Are they renting the house out? Do they have reserves if a tenant doesn’t pay or the home is vacant? If they can’t clearly answer how they’ll keep the payments going, be skeptical. A serious buyer should have a business plan or sufficient income to pay your loan. If someone with shaky finances is trying to do this, they might be hoping to collect rent from someone else to cover your mortgage – a risky game.
• Refusal to Let You Use Your Own Attorney or Title Company: If the buyer insists you only use their attorney or won’t allow an outside party to review the deal, that’s a problem. You should be able to choose an attorney or title agent that you trust to oversee the transaction. Scammers often want to control the process to prevent you from discovering their past or the fine print. If they won’t let you get independent advice, walk away.
• Sketchy History: As mentioned in Best Practices, do a little homework on the person or company. If you find out they’ve been involved in multiple foreclosures or lawsuits, or even if they just popped up recently with no track record, be careful. Florida’s real estate market has seen an uptick in these scam attempts, with new “investment” companies targeting vulnerable sellers. Work only with individuals who have a solid and positive reputation. If anything feels off – like they get evasive when you ask questions, or the paperwork looks fishy – trust your gut.

Remember: In a legitimate deal, the buyer will understand why you’re cautious. They should willingly help you feel comfortable – for example, by meeting at a lawyer’s office, providing documents, and giving you time to decide. High-pressure sales tactics or secrecy are your cue to say no. It’s better to miss out on a deal than end up in a nightmare scenario because of a scam.

Real-Life Examples: Successes and Failures

To paint a clearer picture, let’s look at a couple of real-life scenarios of subject-to deals involving Florida homeowners – one that ended well, and one that went badly. These examples illustrate the best and worst that can happen.

✅ Successful Example: Saving a Home from Foreclosure
John, a homeowner in Florida, lost his job and fell behind on his mortgage. The bank sent a foreclosure notice, and John was desperate to avoid having a foreclosure ruin his credit. An investor offered to buy John’s house subject-to the existing mortgage. After consulting a lawyer, John agreed. The investor brought the loan current and continued making every payment on time, stopping the foreclosure process. John moved out and rented an apartment, and importantly, no foreclosure hit his credit report (“Subject To” Transactions: Pros, Cons, and Title Considerations - Marina Title). About two years later, the investor sold the house to a new buyer. At that closing, the investor used the sale proceeds to pay off John’s remaining mortgage in full, finally releasing John from the debt. John didn’t get any extra money from the resale (since he had already sold the home), but he was satisfied that he avoided foreclosure and the mortgage was ultimately paid off. Why it succeeded: The investor was reputable and kept their promise. They had a plan (renting the house to cover the payments) and sufficient funds. John also took precautions: he had a proper contract and stayed in touch to ensure things were on track. This subject-to deal solved John’s immediate problem and, in the end, protected him from credit damage, which was his main goal.

❌ Cautionary Tale: Scam in Tampa Bay
Jane owned a house in the Tampa Bay area and was struggling to keep up with payments. She was approached by a so-called “investor” who offered a quick way out. He promised to take over her mortgage and even gave her $5,000 in cash at closing to sweeten the deal. Feeling relief, Jane signed over the deed to him. However, after the deal, the buyer never actually paid a single mortgage payment. Instead, he quickly rented out Jane’s old house to tenants and collected rent each month while letting the loan drift into default (The Risk Of Selling Your Home Subject To). It took the bank over a year to complete the foreclosure (during which time the tenants were living in the home, unaware of what was happening). The scammer pocketed the rent money and walked away. The tenants were eventually shocked to be evicted by the bank, and Jane was left with a foreclosure on her record (The Risk Of Selling Your Home Subject To). Worse, because of the foreclosure, the bank later obtained a judgment against Jane for $30,000 (the difference between what was owed and the home’s value). Jane’s credit was wrecked for years. What went wrong: This was a textbook scam. The buyer targeted a distressed seller, pushed her to sign over the deed, and had no intention of honoring the mortgage payments. Jane did not verify the buyer’s background (had she done so, she might have found he’d pulled this trick before). She also didn’t have an attorney representing her, and the warning signs (big promises, quick cash, no follow-through) became clear in hindsight. This story highlights how badly a subject-to deal can end – the seller lost the home, lost her good credit, and gained nothing in return.

These examples show that while some subject-to deals can work out (usually when done with transparency and solid protections), others can be disastrous. As a homeowner, you should assume that everything can go wrong and plan accordingly. Only then, if you proceed, will you have peace of mind that you did what you could to safeguard your interests.

Final Thoughts: Proceed with Caution

Selling your Florida home “subject to” the existing mortgage is a high-risk decision for a homeowner. This method can sometimes provide a lifeline – helping you avoid foreclosure or unload a burdensome property when no other options seem viable. However, it comes with serious risks that you must weigh carefully. The key takeaway is to not be lured in by quick fixes or promises without doing your homework. Always involve professionals (real estate agents, attorneys, title companies) who understand Florida’s laws and the subject-to process.

If you’re ever unsure, remember that you can also consider alternatives: talk to your lender about a loan modification, consider a short sale with the bank’s approval, or seek assistance from Florida housing counselors. Subject-to deals are one tool, but not the only one. And if the subject-to route still appeals to you, make sure you approach it with the same care you would for any major financial transaction. By staying informed, remaining cautious, and seeking expert advice, you can avoid scams and minimize the dangers.

In the end, your home is likely your biggest asset, and your credit is crucial for your future. Don’t gamble with these lightly. A subject-to deal in Florida should only be done if the benefits clearly outweigh the risks and you’ve done everything possible to protect yourself. Keep the balanced perspective: hope for the best outcome, but prepare for the worst. That way, whether you decide to go through with a subject-to sale or not, you’ll know you did so with eyes wide open and a plan in place. Good luck, and stay safe in all your real estate decisions!