Mortgage Gamble: Inside the risky real estate deals leaving sellers on the hook

January 29, 2026 - 22:16

A growing trend in the cooling real estate market is enticing homeowners who are struggling to sell. Known as "subject-to" or assumable mortgage deals, these arrangements allow a buyer to take over the seller's existing low-interest mortgage. For a seller with little equity, it can appear to be the perfect solution to avoid a short sale or foreclosure.

However, real estate attorneys and financial experts are sounding the alarm on the significant, often overlooked, risks that fall squarely on the seller. In a typical "subject-to" deal, the original mortgage remains in the seller's name, even though the new occupant makes the payments. If the buyer defaults, the lender will pursue the original homeowner for the debt, devastating their credit and potentially leading to legal action.

Furthermore, many existing mortgages contain "due-on-sale" clauses, which give the lender the right to demand full repayment if ownership transfers without their approval. While lenders sometimes overlook this, they are not obligated to, potentially triggering an immediate call of the entire loan balance. Sellers are often left relying on a verbal agreement or a poorly constructed contract with the new buyer, offering little legal protection. While the promise is alluring, this gamble can leave former homeowners financially responsible for a property they no longer control.