Seller 2nd Mortgage - need help setting this up.

I’m in the process of selling a rental house to a tenant. They can’t get 100% financing so I am going to offer to take back a seller’s 2nd. However, I’m not sure what I need to do in order to make that happen. Any advice is appreciated.


Howdy Rooman:

Are you going thru a title company to sell the property. They can handle the paperwork. You will need a deed that transfers the title and a promissory note from the buyer to you and a deed of trust if you are in a deed of trust state. You keep the original note and the others get recorded and then you get the deed of trust in the mail from the courthouse and the buyers gets the original deed back. The fees for these documents vary from $75 per to $150 per document.

Thanks Ted. This is some very useful information.

My situation in more detail is as follows: The bank is giving them enough money to pay off the Land Contract, plus a little extra. I am offering to finance the difference between the asking price and what the bank is giving them. The issue (that I perceive) is that I think I have to sign over the title before I get my money from the bank. Is there a way to add the 2nd mortgage independent of the bank closing?? Can I have them sign a Note, and then take it down to the City Clerk and have it added as a 2nd mortgage? I’d much rather have it recorded as a 2nd than be carrying an unsecord Note.

Speaking of Notes, does anyone who visits this forum buy Notes??

All replies appreciated.


Howdy Shawn:

Yes you can create a note and record it after the bank closes or at the same time. The title company will record the 1st mortgage and the 2nd mortgage documents will make mention that the deed of trust is inferior to the 1st mortgage and record it after the 1st if you go that way.

You will sign over title at the closing and not before. You can not record a deed of trust before the bank closing as it would be superior to the bank lien and the title company will want it released or a subordination agreement signed and recorded.

I am sure there are note buyers that are members. You may also place an ad in the classified section of the club. I will contact you personally to give you some leads as well.

Invaluable information Ted…

Another question regarding notes. Since I will taking note back from the buyers. What do Note buyers look for to be attractive?? The Note I’ll be taking back will be around $6500, spread over 5 years at 9% interest. Certainly willing to sell at a big discount. Are unsecured notes just as attractive??

I haven’t discussed the specifics yet with the buyers, so I would like any feedback that could help me contruct the note in a way to be attractive to Note Buyers.

Thanks again for all the useful info!!


Howdy Shawn:

Higher rate, shorter term are better. Buyers credit is important and the higher the down payment the buyer pays the better.

Also, if the 2nd note is seasoned (3-6) months of payments, that will make it more attractive. Whenever I have tried to sell or broker a note the fees have usually turned out to be ASTRONOMICAL. Boy is that a business.

Also, is your seller 2nd disclosed to the lender? Messing around outside of closing can be considered as fraud if it is not disclosed on the Purchase contract.