Owner Financing

General Real Estate Investing
1

I am currently selling a home with owner financing. I have read where you would sell using a land contract or to sign two deeds putting one in escrow transferring title back to yourself in case the buyer defaults. Which method would enable you to get buyer out of the property the quickest? I would probably first try U-haul money but what if that is not enough incentive?

Thanks

2

slipring,

Holding a signed Deed in escrow could be a problem as a Judicial Foreclosure is required. Better check your State Statutes, but I believe you will find the deed would not enforceable for eviction purposes.

Courts generally hold that when a mortgagor (the Buyer) places a deed in escrow in connection with the initial mortgage transaction (you are the one carrying the note), with instructions to release the deed to the mortgagee immediately in the event of a future default, the deed is void and unenforceable. These types of arrangements are deemed unenforceable under general equitable and public policy principles and will not be countenanced by the courts.

U-Haul money is normally sufficient, if you act immediately after the payment is late. Otherwise if you let self-denial set in, you will have to go with a Judicial Foreclosure.

John $Cash$ Locke

3

$Cash$,

Thanks for your reply. I am in Cumberland count, NC. Under a land contranct scenario, would the buyer be required to pay taxes and secure a seperate homeowners insurance policy on top of the mortgage that is created between the buyer and myself?

Thanks

4

slipring,

You would need to change your insurance policy to a Landlords Policy. Also you should include the insurance and taxes in your buyers payment this way you can pay them, so you make sure they get paid.

Advise your buyer to purchase Contents (Renters) Insurance, this way his worldly goods will be covered. This insurance is inexpensive but well worth it. Or as they say in NC “Git R Dun”

John $Cash$ Locke

5

$Cash$,

Should the Contract for Deed be recorded and if so, would the lender catch wind of this as well as modifying the insurance to a Landlord’s policy ?

Thanks