Working through a subject-to deal on a farmhouse with 11 acres where the lien covers the whole parcel
Here is a scenario worth working through in full, because the structure looks clean at first and then runs into a real obstacle. A 1970s farmhouse sits on 11.4 acres at the edge of a growth path, seller relocating, existing loan 211,600 at 3.75% with 26 years left, PITI 1,430 (P&I 1,038, taxes 262, insurance 130). Seller wants 34,000 for equity. The house alone might be valued at 240,000 to 250,000 in current condition. The acreage is the real draw. Road frontage would support a three lot split under current county rules, and finished lots in that corridor have traded 62,000 to 78,000 over the past two years. The theory: take title subject to the existing loan, keep the 3.75% on the house, split three lots off the back, sell two, and use the proceeds to pay off the equity note and build reserve. Keep the house and remaining acreage as a long hold. The theory breaks down here. The mortgage encumbers the whole 11.4 acres. Conveying a lot free and clear requires a partial release from the lender, and asking a lender for a partial release means handing them a document set that shows a deed already transferred. That is precisely the conversation a subject-to structure is meant to avoid. Alternatives worth weighing: sell the lots subject to the blanket lien with a purchase money note and a payoff mechanism at the end, which most retail lot buyers will not touch. Or refinance the whole thing after the split, which gives up the 3.75% and turns this into an ordinary deal at a worse rate. Two things are still open in a case like this: whether the seller would carry the whole balance on a wrap instead, and whether the county's split rules have been confirmed in writing rather than from a zoning map and a phone call. The real question is whether the rate is the actual asset here, or whether this is a complicated version of a land deal wearing a subject-to label.
