If home seller agrees to do seller financing and as home buyer makes monthly payments, what happens if seller stops making payments on his/her loan?
Have a contract, you the seller are the bank, you can foreclose, buyer gains nothing seller keeps all.
thanks for your reply! however, perhaps my question wasn’t really clear and I apologize.
let’s say for example i bought a house from a seller who still has a mortgage and that seller was willing to do seller financing. now I as the home buyer starts to make monthly payments on the house, but the seller who carried back the whole purchase price for me didn’t make any payments on his mortgage. what would happen?
You would lose the house- You need a third party to make the payment to the bank when you pay-or you get the payment book andpay it yourself and send copy to seller wrap around mortgage Carlton Sheets talks a lot about this.
It’s also a little tricky to do because most mortgages are not assumable which means that the seller typically can’t offer seller financing unless he has equity in the house.
There are so many problems with this scenario that I probably would forget about even trying something like this. Seller financing only works if the seller has equity in the property.
For instance, what if you don’t pay? If the seller has the mortgage in his name, he’s going to have to carry the mortgage payments til he forecloses on your house and still make those payments or ruin his credit rating. Then if he needs to buy another house and has a mortgage on his credit, he’s going to be paying a higher interest rate because he’ll have to go stated. And finally what are you going to do about your tax deduction on the interest? Makes it difficult because at least the bank sends you a statement every year saying how much you paid in interest. And of course the main kicker is that the bank could call the mortgage if it finds out that it’s been sold to another party.
Yeah this is what boggles my mind with the folks who claim seller financing is very feasable and make it seem easy to do. When you really look at the specifics of it there is a VERY small % of people even willing to do this, let alone getting it done without any major risks.