Seller Finance Advise

If I am buying and selling seller finance how do I protect myself and make sure my seller is making the payments to his Bank and how do we all avoid the Due on Sale clause?

Thank you


One thing that was recently brought to my attention is that here in TX this type of “sandwich” loan is not allowed so you may look into that for your location first.

From user javipa on a previous post of mine:

“Use a note servicing company. They’ll take your payments, make the loan payments to the bank; the money never gets in the hands of the seller. You do not want to make payments directly to the seller …you do not want to receive payments directly from the end/user buyer either.”

People with low credit scores can scare sellers and make them avoid to give you seller financing. If you are a seller offering seller financing, make sure your purchase and sale agreement or your sales contract provides you an opportunity to review the prospective buyer’s credit history, credit score and references before committing to giving the buyer seller financing.

Yes, this may be true, but we’re not talking amateurs doing a one-off sale here. We’re talking professional flippers, merchandisers, or long term holders.

We’re also talking about motivated sellers and buyers, not conventional ones.

Buyers with bad credit know they can’t get the great prices and terms available to those with clean credit. That’s why seller financing is so attractive to those with bumpy credit, and is such a great way for sophisticated, creative financiers to make money. It’s a profitable niche.

I just made/created $64,000 (yesterday afternoon) in paper equity after expenses, on a Sub2 resale, not including the 10k down I got from a buyer who could not qualify for financing right now.

If I had insisted on great credit, I would have had to lower the price by 30k and wait weeks for a different buyer with good credit to show up. Forget that.

Instead, I get a small cash flow, 10k in my hands, and a note I can sell for a discount in a short time if I choose. None of that would be possible waiting for a buyer with clean credit.