CONSIDERATIONS FOR SELLERS WHO CHOOSE TO CARRY THE MORTGAGE FOR THE BUYER.

CONSIDERATIONS FOR SELLERS WHO CHOOSE TO CARRY THE MORTGAGE FOR THE BUYER.

By JAZ Zydenbos, Keller Williams Realty Elite Partners located in the Sunshine State of Florida.

When you, the seller, decide to carry the mortgage for the buyer here are considerations you need to keep in mind.

• Have a real estate attorney take into consideration your financial needs and the risks you are willing to assume by taking on the mortgage from the buyer.

• Insist upon a due on sale provision.  This means that if your buyer decides to sell the property, the balance is due to you upon sale.

• Do not allow the mortgage to be assumable. It’s risky business.

• If you do not want the mortgage to remain outstanding for a long term but want to make the payments attractive set up a payment schedule to be comparable to a 15 or 30 year payment with the unpaid loan balance due in three to five years.  This is called a balloon payment 

• Offer incentives for the buyer to pay you off early.  Offer a start rate of 6% for the first year, 7% the second year, etc., so the buyer will want to obtain their own financing.

• Only select those types of buyers who either have good credit, a score of 640 or better, or if their score is less get a letter of opinion from a reputable and local mortgage broker as to how long it will take to straighten out the buyer’s credit.  The mortgage broker will be grateful to you for this is a future borrower for their business.

• Get a good but attractive down payment not less than 15% of the sales price.

• Price your home slightly higher, say 5% more than the recent comparables in your area.  If you overcharge, the buyer will never qualify for a loan for the property will not appraise for a new mortgage and you will have to foreclose when the note or balloon is due.

• You should consider requiring tax and insurance reserves if the mortgage is greater than 85% of the property’s value.  This way you’ll be protected from tax liens or an expired insurance policy.  Contact your attorney for further provisions that may be written into your mortgage contract to protect from failure of the buyer to pay for taxes or insurance.

• The mortgage should also contain a provision that states judgment liens or unpaid liens placed on the property constitute a default in the mortgage allowing you the seller to call the entire balance due and payable.

• An additional measure of protection is to have the buyer pledge the property’s rents toward the payment of the mortgage.  In case of default, you as the seller/mortgagee can ask the court to appoint a receiver to collect the rents for the account.   The buyer/mortgagee will also have to pay for court costs.

• A cross-defaulting clause should be included so that no other liens or mortgages may be added and if so, the lien automatically causes a mortgage to be in default.

Some additional considerations include purchase money mortgages that contain unusual provisions, such as a wraparound mortgage, par partial release clause, or a subordination clause.  Do not attempt to do a seller mortgage by yourself.  Involve the professional services of a reputable REALTOR® and an attorney who specialize in seller financing. In the initial sales contract you should avoid abbreviated descriptions of what you and the buyer intend.  For example a clause such as “Seller will take back a standard purchase-money wraparound mortgage” is ambiguous and could lead to disputes.

I hope my blog about owner/seller financing is of help to you as a buyer, seller or professional.  I value your feedback.
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If you are a new to the world of purchasing a home and tired of renting, the journey of seeking homes and getting a loan can be quite exhausting. You need to get help from someone like myself who really knows and understands how to negotiate the best deal for you and that goes for sellers too who would like to achieve a better result in this market. If you would like to get on my daily update of owner financing homes available in all of Florida just click here.  

If you want to find out how you can purchase the house you’ve been wanting anywhere in the Sunshine State of Florida, you can call me anytime at 800-819-4793. JAZ Zydenbos, Keller Williams Elite Partners.

Oh yes, if you’ve been considering a career in real estate anywhere in the US, and Canada with the fastest growing real estate company in North America, call me about that too or click here for more information. now this is JAZ Zydenbos, Keller Williams Realty Elite Partners wishing you financial success in owner/seller financing now and the years ahead. My direct line is (800) 819-4793.  My website is at www.JAZHomeBuys.com or email me at JazzSold@gmail.com .

                            
                                               As seen in the Washington Post online