i am about to make deal to sell my house using selling finance. the buyer told me they will find an attorney and they pay the cost. but can anyone tell me what exactly going to happen. i mean i guess we close at an attorney’s office and sign all the papers. but after that what is going to happen? the buyer is going to send me a check every month? do the paper we sign will be recorded in the county? do they have an escrow account? if they do am i going to collect all the tax and insurance and pay for them. who is going to get the bill for tax and insurance? at the end of the year should i send them a statement to tell them how much interest and principle they paid like the bank does? i guess i need someone to give me a complete walk through for what everyone does. more over if they stop paying how i foreclose them? sorry i guess i need to learn a lot. thanks a lot
Hi,
If your state does attorney closings rather than using a title or escrow company the attorney closing office can probable do what's called a "Servicing Account" it generally cost's about $8 to $12 dollars per month once it is set up!
The buyer will then send there payment check directly to the servicing account and the servicing account will pay the first, second and third mortgage and will impound if necessary the tax and insurance funds (Unless your lender does impounding for a PITI mortgage).
If you are seller financing and recording the transaction the servicing account will generate a yearly statement to the buyer calculating exact numbers for tax purposes.
Any funds that are positive of the underlying mortgage come to you monthly or quarterly!
To foreclose you go through all the same legal requirements of a bank or lender, depending on your state you may be able to set up “Automatic Deed in lieu of Foreclosure” where title will automatically revert back to you if more than 3 payments are missed in a row???
Ask your attorney closing officer the legalities and whether that’s possible to do? You will also need the approval of your buyer to waive a formal foreclosure in favor of “Automatic transfer of Deed” in the event buyer fails to perform. (Normally 91 plus days to show missing 4 actual payments)
GR
It’s enormously difficult for me to believe that you’re actually as ignorant about the details you’re presenting here …especially allowing a buyer to arrange the details. Do you really need help here …honestly?
thanks a lot. is it difficult to get the buyer out after the deed comes back to me? what if they stay. do i have to go to the court? maybe i worry too much thanks
javipa of course i do. i just learned. the buyer volunteered to find a lawyer. but i want to talk to the lawyer to let him or her set up correctly. without you guys answer i will ask the lawyer the same questions as i asked here. but now i can give the lawyers some suggestion such as can we set up an service account and he will tell me why and why not… actually if you have different ways of doing it. let me know. i have never done this before.
Okay d, I’ll bite… :smile
Assuming the buyer is motivated…
Here’s what I do when I’m financing a buyer…
Assumptions:
0. I want the buyer to refinance the loan as “owner” not try to get new purchase money loan as “buyer.”
- I want 10% down (this will allow easier conventional refinancing).
- I want payments made through a note servicing company, not to me personally (at buyer’s expense) through “notecollection[dot]com”.
- I want to keep the deed (in escrow) until the buyer pays me off.
- I want nothing recorded to cloud the title, in the event the buyer defaults. Otherwise, I’ve got to sue to remove the lien. or b) have the buyer sign a quit claim and Grant/Warranty Deed in favor of me (or my corp) which I personally hold in my fire safe.
- I want the buyer to pay me off in a certain number of mos/yrs, or pay me additional money to extend financing period, or pay a higher interest rate.
- I want a large late payment fee in the event the buyer fails to pay by the first day of the month.
- I want the payments made in advance, not in arrears.
- I want to use a Land Contract (Agreement for Deed / Contract for Deed) realizing that in many states this represents an equitable transfer of interest and requires judicial foreclosure in the event of default, despite the fact the deed has not changed hands.
- I want the buyer to sign a Cognovit Promissory Note, separate from the Land Contract note, that makes the buyer personally liable for the entire balance of the note, so that I have leverage in getting the defaulted buyer out of my house without having to judicially foreclose, or perform an eviction. The only way for the buyer to get out from under liability to the Cog. Note is to pay it off on schedule or file bankruptcy.
- I want the insurance, taxes, and h.o.a.'s all impounded and funded in advance with a failure to pay constituting a default on the note.
Hope that helps.
P.S. Frankly, you’re in for a complete renegotiation of the deal after you introduce all these covenants. What I do to avoid turning everything into a negotiation is simply to get agreement on the payments and the down payments/price and schedule a closing. Then I bring all the completed contracts, notes, and deeds to closing for the buyer to approve.
Meantime, involving an attorney is a fairly certain deal killing strategy.
I give you a >1% chance of getting your covenants accepted, if an attorney is involved.
thanks a lot javipa. the buyer asked for the deed. I guess i have to do a AITD in this case. how do you find a lawyer to do all this for you and how much does it cost. i may not be able to follow all your instructions this time or it may scare the buyer away. if i do the automatic deed transfer do i have to ask the buyer to do something to clean up the deed before it comes back to me. i dont quite understand the deed part.
So what the buyer asked for the deed?
BTW, do you own this property free and clear?
You can’t unwind an AITD like you can a Land Contract.
Evidently, you’re needing this deal more than the buyer does, and thus you’re operating from a position of weakness. Maybe this house is a piece of crap? Just asking.
Why don’t you just bend over right now and get it over with…? :flush :biggrin
I think you’re headed for a disaster, the way you’re describing things.
Good luck!
After reading my last post, it sounded insensitive, rude, and maybe even mean… That’s not my intention. :banghead
I honestly hope you are successful in the sale of your house and that it goes exactly how you want it.
When I say “good luck” I mean “do well.” :smile
Just get up. no i still have mortgage on it. and it is almost new. so the automatic transfer of deed for AITD does not exist? and a company i know who can do all the paper work told me Land contract is hard to do it correctly which i dont know why? i think i should find a good attorney on this.
Whomever told you that Land Contracts are “hard to do correctly” evidently does not know “what” they’re doing.
AITD’s are harder to do correctly, if anything is.
You should definitely contact an attorney specializing in “real estate contract law” only.
Ok…
First if you sell and transfer title…
You “cannot” put the deed in escrow…
I know alot of gurus teach that stuff…
It’s absolutely false… Seminar stuff not real world…
Plenty of case law against doing that because
it forfeits “due process”
If it could be done don’t you think Bank of America
wold do that instead of foreclose…
Ok, that said…
If you have underlying loans you will just sell
on a Wrap Around Mortgage…
We escrow deeds as a matter of course in our business. We execute a Grant Deed/Warranty Deed in favor of our buyers, but do not transfer the deed, or record it, until our buyers pay us off.
Meantime, our loan servicer holds the deed, unrecorded, on everyone’s behalf, and then records the deed when the terms of the note are satisfied, or returns the deed to us, if the note defaults, according to the terms of our note.
Selling on a “wrap around” mortgage meanwhile, involves actually transferring the deed, subject to the underlying encumbrances. In these cases, the deed is not put in escrow, but is simply notarized and recorded either in favor of the buyer himself, or in the name of a trust.
And Javipa…
If they ever take you to court…
You’ll lose…
And they’d likely have a good case
for fraud…
You can’t both sell a property and
not sale a property…
Plenty of case law to support that…
Otherwise again… BOA and all the big guys
would do it as well…
David A.
Are you saying selling a property using a Land Contract is illegal? If so please cite case law where it is.
A land contract (sometimes known as a “contract for deed” or an “installment sale agreement”) is a contract between a seller and buyer of real property in which the seller provides financing to buy the property for an agreed-upon purchase price and the buyer repays the loan in installments. Under a land contract, the seller retains the legal title to the property, while permitting the buyer to take possession of it for most purposes other than legal ownership.
The sale price is typically paid in periodic installments, often with a balloon payment at the end to make the time length of payments shorter than a corresponding fully amortized loan without a final balloon payment.
When the full purchase price has been paid including any interest, the seller is obligated to convey legal title to the property to the buyer.
An initial down payment from the buyer to the seller is usually also required by a land contract.
John $Cash$ Locke
Okay, really? I’ll be sure to note your post. Meantime, I’ll just continue making money selling property illegally, getting sued, losing, getting prosecuted for fraud every so often, and finally being a model lender for BOA.
:beer
No land contract aren’t illegal…
(Well in Texas they may as well be,
the way the statutes against them
are written)
A land contract is simply an “option
to purchase” a property on payments…
And until they have made that last option
payment they… don’t have the right to
purchase…
You aren’t really selling…
I’m talking about folks that sell properties…
Transfer the deed… and then put a deed in escrow
in lieu of foreclosure…
That’s what you should be doing… and a lot of gurus
tell you it’s ok…
it’s not it forfeits due process…
Putting a deed in escrow in when selling
on contract for deed… in order to protect the
buyer…
That might be ok… on the otherhand…
I could see where a creditor that won a judgement
against you for something… could argue that
the house you sold to your buyer on a contract for deed
was not a completed sale and therefore can attach
the judgement to the property which could cause you all kinds
of problems… to your buyer when it came time to deliver
title…
David A.
I would recommend you go back and read Javipa’s posts, he is using a Land Contract, not just putting the deed in escrow as you described.
Quote: “I could see where a creditor that won a judgement
against you for something… could argue that
the house you sold to your buyer on a contract for deed
was not a completed sale and therefore can attach
the judgement to the property which could cause you all kinds
of problems… to your buyer when it came time to deliver
title…”
Next I would also recommend you use a LLC, or Corp. when dealing with properties and not place them in your name personally. Use common sense so the judgment issue does not present itself.
If you are trying to defend the way you teach or do business, I think you have a lot to learn about the correct way of investing from your posts thus far.
John $Cash$ Locke