Key Takeaways
- Subject-to closings: instruct title company NOT to pay off existing mortgage.
- Seller financing: recorded liens, notes, and required disclosures.
- Third-party servicing recommended for all creative payment management.
- Ongoing management extends well beyond closing.
Creative closings require specific procedures differing from conventional transactions.
Subject-To Closing
Seller Financing Closing
Record deed, execute and record promissory note and mortgage, distribute down payment, establish loan servicing, provide all disclosures. Seller receives recorded mortgage, note, title insurance, and servicing agreement.
Ongoing Management
Subject-to: monitor lender communication, ensure payments current. Seller financing: payment collection via servicer, annual 1098 forms. Lease options: track rent credits, option exercise timeline. Wraps: dual payment streams through escrow.
Compliance Matrix
Sources
- American Land Title Association — Title Insurance Standards(2025-01-15)
- CFPB — Mortgage Servicing Rules(2025-01-15)
Common Mistakes to Avoid
Using title company unfamiliar with subject-to
Consequence: May refuse or accidentally pay off existing mortgage
Correction: Identify creative-friendly title company before contracting.
Self-servicing seller financing
Consequence: Missed payments, tax errors, compliance failures
Correction: Use third-party servicer ($15-$30/month).
Not recording seller lien
Consequence: Seller security unprotected
Correction: Always record mortgage/deed of trust at closing.
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Test Your Knowledge
1.What is the critical instruction for a title company in a subject-to closing?
2.What is the recommended approach for managing seller financing payments?
3.Why must the seller's lien be recorded in a seller financing transaction?