The Deal Was Done… And That’s Where It Went Wrong
A question came up recently from an investor who was genuinely trying to do the right thing.
They had purchased a property Subject To an existing FHA loan.
Now the seller—the original homeowner—was trying to buy another house.
And they were being told:
“You can’t get approved… because this loan is still in your name.”
So the investor asked:
“How can I help my seller fix this?”
First—Credit Where It’s Due
Kudos to this investor for asking the question.
A lot of people wouldn’t.
They’d ignore it… or hope it works itself out.
But Here’s the Real Answer
This isn’t a “how do we fix it now” problem.
This is a:
“This should have been handled before the deal ever closed” problem.
Kudos to this investor for asking the question.
A lot of people wouldn’t.
They’d ignore it… or hope it works itself out.
But Here’s the Real Answer
Kathie Russell—investor and retired attorney who has worked through hundreds of Subject To deals—jumped in with the reality:
A properly structured Subject To deal includes:
- Clear, written disclosures explaining exactly what happens to the seller after closing
- Specific explanation of how this impacts their ability to get another loan
- Documentation that shows someone else is legally responsible for the payments
- A structure that lenders may recognize when evaluating the seller’s debt
If that had been done…
👉 The seller would already know whether they could qualify for another FHA loan
👉 And under what conditions
Why This Becomes a Problem
When that conversation doesn’t happen up front:
- The seller assumes they’re “free and clear”
- The loan is still in their name
- It still shows up on their debt-to-income
And now:
👉 They can’t qualify
👉 They’re frustrated
👉 And they’re looking back at you
Can This Be Fixed?
Maybe.
But this is where it gets uncomfortable.
If the deal was structured correctly:
- Some lenders may accept documentation showing someone else is responsible for payments
- Certain structures (like trust-based setups) may help
- There are FHA exceptions—but they are limited
- Distance requirements
- Equity requirements
- Specific qualifying conditions
If it was NOT structured correctly:
Now you’re dealing with:
- A seller who may not be able to buy a home
- Missing disclosures that can’t be recreated after the fact
- A situation that may come back on you legally
And in some cases:
👉 There is no clean fix
The Bigger Issue (And This Is the Part That Matters)
Kathie said something that really stuck:
This is happening more and more… and it’s not just hurting individual deals.
It’s hurting sellers.
And if it continues…
👉 It puts the entire strategy at risk.
Because when enough people get hurt:
👉 Regulations follow
Don’t believe us . . do a little research about wholesaling disclosure law, there’s one about to be passed in Missouri. Or Kansas Attorney General sues Kansas Wholesaler . . this is a huge case just starting to play out. Consumer complaints created both of these things to happen.
Subject To is coming up fast right behind Wholesaling.
This Is Why “Doing It Right” Matters
Subject To isn’t the problem.
Done correctly, it can:
- Help sellers move on
- Solve real financial problems
- Create opportunities for investors
But when it’s done without:
- Proper disclosures
- Proper structure
- Real understanding
It creates situations like this.
If You Want to Understand This Fully
If you’re asking:
“How do I fix this after the fact?”
You’re already behind.
The better question is:
“What needs to be set up before I ever close a deal like this?”
This exact type of situation—what should happen before closing, what can go wrong, and how to structure these deals correctly—is being covered in detail in the upcoming Master Class with Vena Jones-Cox.
You can find it on the MAREI Calendar on April 15th. Do you or someone you know need this class?
It’s only $47 for MAREI Members who sign up early. Its Virtual – Recorded – and Guaranteed!
Subject To
Get it right and it's so good for everyone. Get it wrong and you might end up in court.
