A Wholesaler Pitched You a Sub-To. Read This First.
A calm, seller-side checklist for Utah homeowners offered a subject-to deal: the due-on-sale clause, your credit, and what to ask before you sign.
Informational onlyThis page is general information about Utah law, not legal advice for your situation. Reading it doesn't create an attorney-client relationship. Read the disclaimer.
A subject-to offer means the buyer takes your deed and promises to make your mortgage payments, but the loan stays in your name. That leaves your credit and your liability on the line. It also can trigger your loan's due-on-sale clause. Some of these deals work out. Read the checklist below before you sign anything.
What does "subject-to" actually mean?
"Subject-to" means you sell the house "subject to" your existing mortgage: the deed moves to the buyer, and the loan does not. You stay the borrower on the note. The buyer takes the property and promises to keep your payments going.
That is the whole structure in one sentence. Everything else in this guide follows from it.
Here is how it usually looks in practice. You sign a deed transferring the house to the buyer or the buyer's company. The buyer, or a company the buyer controls, starts sending your monthly payment to your lender. You get little or no cash at closing, sometimes a few thousand dollars for moving costs. The buyer gets a house with a loan already attached, often at a lower rate than any new loan available today.
A concrete example helps. Say your Provo home is worth $430,000. You owe $310,000 at 3.25%, with 25 years left. Your principal and interest payment is about $1,511 a month. A wholesaler offers you $6,000 to move and says the buyer will "take over payments." After closing, the buyer owns the house. Your name is still on the $310,000 loan.
What "take over" does not mean:
- It does not mean the lender approved the buyer.
- It does not mean the loan was assumed or refinanced.
- It does not remove your name from the note.
- It does not change who the lender calls when a payment is late.
Novation and a formal assumption are different things. In a formal assumption, the lender approves the new borrower. In a novation, the lender agrees to release you and substitute the buyer. Whether your loan allows either one is a question for your lender and your attorney. A subject-to sale, by definition, happens without that approval.
Wholesalers do this work for a living, and many of them are honest people. Some are assigning a contract to an end buyer. Some are buying for themselves. Either way, you are entitled to understand the structure before you agree to it. Asking careful questions is not an insult. A good buyer will expect them.
What is the due-on-sale clause, and does a subject-to sale trigger it?
The due-on-sale clause lets your lender demand the full loan balance if you transfer the property without its consent. Federal law lets lenders enforce it (12 U.S.C. § 1701j-3(b)(1)). A subject-to transfer is not on the exemption list (12 U.S.C. § 1701j-3(d)).
Most residential mortgages contain this clause. It is sometimes called an acceleration clause. It gives the lender a choice, not an obligation. The lender may call the loan due, or it may not.
Federal law lists specific transfers where a lender cannot use the clause on homes with fewer than five units (12 U.S.C. § 1701j-3(d)). The list includes a transfer to a spouse or children, a transfer after a divorce, a transfer at a joint owner's death, a lease of three years or less without a purchase option, and certain living-trust transfers. A sale to an investor is not one of them. Neither is a lease with an option to buy.
So a subject-to deal can trigger the clause. What happens next is the part nobody can promise you. This site does not publish guesses about how often lenders act. You will hear confident numbers from people on every side. Treat any number without a source as opinion.
What matters for you is simpler. If the lender does call the loan, the balance becomes due. With the example above, that is roughly $310,000. The buyer would need to refinance or pay it off. If they can't, the lender's remedy is foreclosure on the house, and the default is on your loan.
You can learn more about how the clause works in the due-on-sale explainer. The selling with a mortgage guide covers the same risk for wraps.
What happens to me if the buyer stops paying?
If the buyer stops paying, the loan is still yours. Your lender reports the late payments on your credit, sends notices to you, and can foreclose on the house. Selling the house does not end your debt.
This is the risk that matters most in real life. It is also the easiest one to plan for.
Here is what typically happens, in order. A payment is missed. The lender charges a late fee and may report the delay to the credit bureaus after 30 days. On an owner-occupied home loan, Utah requires a written notice at least 30 days before a notice of default is recorded (Utah Code § 57-1-24.3). Whether that notice applies after you move out depends on the facts, so ask an attorney. Then the lender records a notice of default (Utah Code § 57-1-24). From that recording, the borrower has three months to reinstate by paying what is past due plus costs (Utah Code § 57-1-31). After that, the trustee can sell the house. Only a Utah attorney or a licensed Utah title company can conduct that sale (Utah Code § 57-1-21).
The foreclosure timeline tool computes those dates from a default date.
Now the practical problems, which are practice guidance rather than statute:
- You may learn late. Statements and notices may go to the buyer's address, not yours. By the time you hear, two or three payments may be behind.
- Your credit takes the hit. A 60- or 90-day late payment on your report can affect your next mortgage, car loan, or rental application.
- Your next loan is harder. Even with perfect payments, a lender reviewing your next application usually counts the $310,000 balance as your debt.
- You may have no way back in. If the deed is recorded in the buyer's name, you can't sell or refinance the house to fix the problem.
If you can't reach the buyer
If payments stop and the buyer goes quiet, move quickly and in writing. This is practice guidance, and every situation is different:
- Call your lender and ask for the payment history and the current amount past due.
- Send the buyer a written notice by email and certified mail, keeping copies.
- Check the county recorder for any new documents on the property.
- Pull out your agreement and look for a cure period, a performance deed of trust, or a right to take the property back.
- Call a Utah attorney the same week. The three-month reinstatement window runs from the notice of default, not from the day you find out.
How does a subject-to deal compare to a wrap or a plain seller-carry?
A subject-to deal leaves your loan in place and gives you little protection unless you add it. A wrap also leaves your loan in place but makes the buyer owe you on a new note. A plain seller-carry usually pays off your loan first.
The table below compares the common ways to sell a home with a mortgage. It is a general comparison, not advice on any one deal.
| Subject-to | Wrap (all-inclusive trust deed) | Plain seller-carry | Traditional sale | |
|---|---|---|---|---|
| Who holds title after closing | Buyer | Buyer | Buyer | Buyer |
| Your existing loan | Stays in your name | Stays in your name | Usually paid off at closing | Paid off at closing |
| Due-on-sale exposure | Yes | Yes | No, if your loan is paid off | No |
| What the buyer owes you | Often nothing beyond the promise to pay | A new note for the price less the down payment | A new note for the amount you carry | Nothing; you are paid in cash |
| Your security if the buyer defaults | Only what you negotiate | A recorded trust deed in your favor | A recorded trust deed in your favor | Not needed |
| Cash to you at closing | Usually little | The buyer's down payment | Down payment plus loan payoff | Your full equity, less costs |
| Who typically pays the lender | The buyer, directly or through a servicer | A servicer pays your lender out of the buyer's payment | No lender to pay | No lender to pay |
A wrap is the closest cousin to a subject-to deal. In a wrap, the buyer signs a new note to you for, say, $390,000 at 6.5%. You keep paying your $310,000 loan out of what the buyer pays you. You earn the spread between the two. The wrap spread calculator shows that monthly spread and what you would owe if the lender accelerates.
A plain seller-carry avoids the due-on-sale question, because your loan is gone. It works when the buyer's down payment, plus any other cash, is enough to pay off your balance. On a $430,000 sale with a $310,000 loan, that means roughly $310,000 of cash at closing. That is a lot to ask, which is why it fits sellers with more equity.
For a side-by-side of the two investor structures, see subject-to vs. wraparound.
Does the agent have to warn me about the due-on-sale clause?
Yes, if a Utah real estate licensee is involved. Before a binding agreement, the licensee has to disclose in writing that a due-on-sale clause exists or may exist, and the possible consequences of selling without the lender's authorization (Utah Admin. Code R162-2f-401a(6)(d)).
That rule reaches licensees: agents and brokers. It does not reach a private buyer or wholesaler who holds no Utah real estate license. Many wholesalers are unlicensed private buyers. In that case, no one on the other side has a rule-based duty to give you that written warning.
A few practical points follow from this:
- If an agent represents you, expect a written due-on-sale disclosure before you sign. If you haven't seen one, ask for it.
- If the buyer's agent is licensed, the disclosure duty applies to them too.
- If no licensee is involved, get the explanation from your own attorney. It should be someone who works for you, not for the buyer.
There is also no state-approved subject-to form in Utah. The current list of approved forms does not include one (Utah Admin. Code R162-2f-401f). So a subject-to deal is always papered with custom documents. Custom documents are exactly the kind worth having your own attorney read.
What questions should I ask before I sign a subject-to deal?
Ask who makes the payment, how you will verify it every month, and what happens the first month it is late. Then ask about insurance, escrow, your security, and the buyer's exit plan. Get every answer in writing.
This checklist is practice guidance. It is not a statute or a form. Bring it to the kitchen-table meeting and write down each answer.
- Who pays the loan, and how will I verify it? Ask whose bank account the payment comes from. Ask for online read access to the loan account, or monthly proof of payment. "Trust me" is not a verification plan.
- Will a third-party servicer handle the payments? A servicer is a company that collects the buyer's payment and pays your lender. It creates a paper trail both sides can see. Ask who the servicer is and whether you get the monthly reports. The note servicing article explains how that works.
- What happens if a payment is late or missed? Ask for a written cure period, a default notice to you, and a right to act. Ask how fast you will hear about a missed payment.
- How will the house be insured, and in whose names? Insurance on a subject-to property is a practice question with no Utah statute behind it. Many sellers ask that both names appear, and that the lender stays listed as mortgagee. Talk to an insurance agent and an attorney before closing. A lapse in coverage is a loan default on its own.
- What happens to my escrow account? If your lender collects taxes and insurance, you have an escrow balance. Ask who gets it, and how the monthly escrow portion will be paid going forward.
- What security do I get? Ask for a performance deed of trust or other recorded security in your favor. That gives you a way to act on the property if the buyer breaks their promises. Without it, you may be relying on a handshake.
- What is the exit plan, and by when? Ask when the buyer plans to refinance or sell and pay off your loan. Get a date. A deal that pays off your loan in three years is different from one that runs for 25.
- Is my loan FHA, VA, or conventional? If it's FHA or VA, stop and ask about an assumption. Those loans are generally assumable with the servicer's approval, so a qualified buyer can take the loan over properly instead of leaving it in your name. On a VA loan, your entitlement generally stays tied up until the loan is paid off or a qualifying veteran buyer substitutes theirs. Ask your attorney and your servicer.
- Can my own attorney review everything? A buyer who welcomes that review is a good sign. Pressure to sign today is a reason to slow down.
- Will I get a copy of every recorded document? Ask for copies at closing, with the recording numbers. You should be able to see exactly what went on the public record.
Put the answers side by side with the net cash you would get from a regular sale. That comparison often makes the decision for you.
How should the deed and the other documents be recorded?
The deed to the buyer, and any trust deed securing promises to you, should be recorded with the county recorder at closing. Recording gives everyone constructive notice of the document (Utah Code § 57-3-102). An unrecorded document can lose to a later buyer who records first (Utah Code § 57-3-103).
Recording protects whoever the document protects. That is why you care about what gets recorded, not just what gets signed.
Here is what that means for you:
- Your security should be recorded, too. If you get a performance deed of trust, it should go on the record at closing. An unrecorded one may do you little good against a later lender or buyer.
- Watch for documents you didn't expect. Some deals include a power of attorney, an authorization to talk to your lender, or a memorandum. Read each one. Ask why it is needed and how long it lasts.
- Use a Utah title company for the closing. A title company can run the title search, handle the deed, and record the documents. Ask whether they will close a subject-to transaction, and what title insurance is available to each side.
- Keep your copies. Store the recorded deed, any trust deed in your favor, and the closing statement together. If something goes wrong in year three, you will need them.
A recorded deed moves title to the buyer on the public record. It does not tell your lender anything about who is making the payment. That is why the payment-verification questions above matter as much as recording does.
What can I do instead of a subject-to sale?
You have at least four other paths: list with an agent, sell outright for cash, offer a seller-carry that pays off your loan, or do a wrap with real protections. Each trades speed, price, and risk differently.
None of these is right for everyone. Compare them honestly against the offer in front of you.
- List with an agent. If you have equity, a regular sale usually pays off your loan and puts the rest in your pocket. On the $430,000 example, that could leave you well over $90,000 after the loan and typical selling costs. It takes longer, and it needs the house in shape to show.
- Sell outright to a cash buyer. An investor or wholesaler may make a cash offer instead of a subject-to offer. The price is usually lower than retail, but your loan is paid off at closing. Your risk ends that day.
- Offer a seller-carry that pays off your loan. If the buyer can bring enough cash to pay off your $310,000 balance, you can carry the rest on a note and trust deed. Your loan is gone, and the due-on-sale question goes with it. The seller-carry calculator runs the numbers.
- Do a wrap with protections. If your loan must stay in place, a wrap gives you a new note from the buyer and a recorded trust deed in your favor. Pair it with a third-party servicer, insurance planning, reserves, and a firm exit date.
And sometimes a subject-to deal is the reasonable choice. That is often the case when you owe close to what the house is worth, need to move quickly, and the buyer agrees to every protection on the checklist. The investor side of these deals is covered on the investors page.
How do I lower the risk if I decide to go ahead?
Stack protections: written due-on-sale disclosure, a third-party servicer, payment access for you, insurance planning, a recorded security instrument, reserves, and a firm exit date. None removes the due-on-sale risk. Together they shrink the damage if something goes wrong.
This list is practice guidance, not a legal requirement. Think of it as the minimum a careful seller asks for.
- Written disclosure. Get a plain-English written explanation of the due-on-sale clause and what happens if the lender calls the loan. If a licensee is involved, they owe you one (Utah Admin. Code R162-2f-401a(6)(d)).
- A third-party servicer. Payments go from the buyer to the servicer to your lender, with statements to both of you.
- Your own access. Keep online access to your loan account so you can check payments yourself every month.
- Insurance planning. Confirm coverage, the named insureds, and the mortgagee clause with an insurance agent before closing.
- Reserves. Ask the buyer to fund a reserve, for example three months of payments, or about $4,500 on the example loan. It buys time if a payment is missed.
- Recorded security for you. A performance deed of trust or similar instrument, recorded at closing.
- A firm exit date. A refinance or payoff deadline written into the agreement, with a consequence if it passes.
- Your own attorney. Someone who reads every page and works only for you.
Seller bankruptcy, buyer bankruptcy, and a seller's death in the middle of a deal each raise their own questions. There is no short answer for any of them. If one of those is on your mind, ask an attorney before you close.
If you would like your own attorney to read a subject-to offer before you sign, contact Greg. Document work for a seller-financed deal is a $750 flat fee, and the services page lists what it covers.
What Greg would tell you
Before you sign, write down who is going to pay your loan next month and how you will know it was paid. If the answer is anything other than "I can check it myself," slow down. A subject-to deal can work, but only when you have a way to see a problem early and the paperwork gives you a way to act.
Frequently asked questions
Is a subject-to deal legal in Utah?
Transferring a deed while a loan stays in place is not a crime, but it can trigger the due-on-sale clause. Federal law lets your lender enforce that clause, and a subject-to transfer is not on the exemption list. 'Legally allowed to' and 'actually goes well' aren't always the same thing. Have a Utah attorney read the documents before you sign.
Will a subject-to sale hurt my credit?
It can, because the loan stays on your credit report after the sale. If the buyer pays on time, your report typically shows an open loan in good standing. If a payment is late, the late mark is yours. The balance also counts against you when you apply for your next mortgage.
What if the buyer stops paying the loan?
The lender treats it as your default, because the loan is still yours. You may get a late notice first, then a notice of default. Utah gives a borrower three months after a notice of default is recorded to reinstate by catching up. Call an attorney the day you learn a payment was missed.
Can I get the house back if the buyer walks away?
Only if your documents give you a way to, which is why a security instrument for you matters. A performance deed of trust or similar protection can let you recover the property if the buyer defaults on promises to you. Without one, you may owe the loan on a house you no longer own. Ask an attorney what your paperwork allows.
Should I just say no to every subject-to offer?
Not necessarily; some subject-to deals make sense for the seller. They tend to fit when you have little equity, need to move fast, and the buyer accepts real protections for you. Compare the offer against listing with an agent, a cash sale, and a seller-carry that pays off your loan.
This site is for general information about Utah law and is not legal advice. Using it does not create an attorney-client relationship. Every transaction is different — talk to an attorney about yours. Attorney advertising.
Related reading · For investors
- 01
Subject-To vs Wraparound Mortgage in Utah: Which Is Easier to Refinance?
Subject-to and wraparound deals both leave the seller's loan in place and both carry due-on-sale risk. Here is how title, payments, security, and the refinance exit compare in Utah. - 02
Can I Seller-Finance My Utah Home If I Still Have a Mortgage?
Yes, through a wrap or all-inclusive trust deed, but the due-on-sale clause stays with you. The risks, the math, and the safeguards, from a Utah attorney with a flat fee. - 03
Contract for Deed in Utah: What the Buyer Gives Up and What the Seller Gets
A Utah attorney's plain-English guide to contracts for deed: forfeiture versus foreclosure, the court cases that limit forfeiture, and how buyers protect themselves.