I am presently trying to help a couple in Florida who are now facing foreclosure after trusting people who represented themselves as experienced members of the “SubTo Community.”

People come to me from time to time with these problems and each one makes me more mad than the last, because all of these problems could SO EASILY have been avoided.

In June 2024, the so-called TC contacted the sellers' real estate agent about purchasing their Panama City property subject to the existing mortgage.

The TC  represented that he was a transaction coordinator and would protect the seller throughout the process. The seller says they paid him $1,000 in cash outside closing because he told them that was all he was making.

However, the settlement statement appears to show an additional $11,700 wholesale fee paid to him.

That is the first serious concern and huge red flag.

The seller’s real estate agent did not understand the transaction and stepped away. Today, the seller has only the purchase contract. She says the other documents she signed electronically are no longer available through DocuSign (they have been deleted by the TC), and she does not have copies.

The contract was reportedly assigned, and the property was conveyed an individual by general warranty deed.  Second big red flag!

Now, approximately two years later, the mortgage payments have stopped.

The original seller is still personally responsible for that loan, but they no longer own or control the property. They say they have spent approximately three months trying unsuccessfully to get the payments made.

They are now facing foreclosure—and the damage to their credit, financial security and peace of mind that comes with it.

They contacted me today.

I am attempting to reach both the TC and the buyer and obtain a voluntary transfer of the property back to them. At the same time, I am coordinating with a Florida attorney regarding legal action.

I have also been given contact information for someone described to me as an FBI financial-crimes investigator and have an appointment scheduled. I was told that the buyer's name may already be known to that investigator, but I have not independently confirmed that information.

A subject-to transaction can be an effective tool, but it places the seller in an extraordinarily vulnerable position. The seller remains liable for the mortgage even though someone else controls the property.

A purchase contract and a promise to “take care of the payments” are not enough.

Before entering a subject-to transaction:

• Use a trusted TC who has experience with subject to deals and READ your documents! Make sure there is protection for your seller and ask "what happens if payments are not made?" Make sure you understand the answer and that it is in writing and signed by the buyer.

• Do not rely on someone’s membership in a Facebook group, association with a well-known educator, social-media following or claim of being “certified.” None of those things guarantees competence, honesty or financial capacity.

• Verify the buyer’s identity, entity, experience, financial resources and track record. Verify with sellers from prior transactions and confirm that their loans are still being paid.

• Find out exactly who is receiving money from the transaction and how much. Every assignment fee, wholesale fee, consulting fee and payment outside closing should be disclosed in writing. READ the settlement statement and understand it or have someone explain it to you until you do.

• Use a qualified closing attorney or title company that understands subject-to transactions.

• Use a properly drafted trust created specifically for subject-to transactions—not a generic land trust downloaded from the internet. In the transactions I structure, I use an EquityBridge Trust.

• Understand the due-on-sale provision and all applicable federal and state laws. No structure should be represented as automatically eliminating every legal or lender-related risk. The EquityBridge Trust assures all of these things are addressed.

• That structure protects the seller from dangers associated with giving up ownership while remaining liable for the debt. It is also specifically designed to address due-on-sale and Dodd-Frank concerns because the seller remains protected while the original mortgage is outstanding.

• Never allow the property to be deeded directly to an individual in a subject-to transaction. In this case, the seller transferred the property by general warranty deed to Mitchell Pomeroy personally. That left them responsible for the mortgage while putting ownership and control of the property in someone else’s name.

• Make sure your TC explains how you can verify that payments are being made each month

• Address what happens after one missed payment—not after three months of missed payments. The documents should provide meaningful remedies and a clear process for returning control of the property.

• Confirm that property taxes, insurance, HOA dues and other obligations will be monitored and paid.

• Never close until the seller has received and safely downloaded a complete copy of every signed document, settlement statement and recorded instrument.

• Most importantly, do not do a subject-to deal with someone simply because they know the vocabulary and sound confident.

The real test is not whether a buyer can acquire the property.

The real test is whether that buyer has the character, systems, reserves and accountability to protect the seller for as long as the seller’s name remains on the loan. I have a sub to right now with the tenant coming up on the second month without paying. I still pay the mortgage. The mortgage is my problem. Getting the tenant to pay is my problem. If they don't pay, I still have to. It is not the seller's problem.

Subject-to is not the problem.

Doing subject-to transactions with unqualified or untrustworthy people—and without meaningful protections—is the problem.

If someone cannot clearly explain how the seller will be protected if the buyer stops paying, that person should not be handling a subject-to transaction.

This seller trusted people who told them they knew what they were doing. Now they are the ones facing foreclosure.

Please learn from what happened to them.