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Does anyone have any information on or can anyone point me to some good information on seller carried mortgages when the seller acts as the mortgage lender to the buyer of a house?
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Go to Nolo.com and search "Seller Financing."
I know two people who did this. My grandparents sold to my uncle successfully (he was buying their home as a 2nd home which he made his primary home in retirement). My former neighbor did this and ended up having to foreclose and then fix up a trashed house to sell again and the entire process caused her a lot of stress (I felt I was watching her age rapidly before my eyes).
Proceed with extreme caution unless it's someone you know & can really trust. Me personally, I probably wouldn't do it having seen what it did to my former neighbor. -
I think what you're describing is also called a land contract?
When DW and I were trying to sell the house we previously lived in, we had an offer to buy our house on land contract. We ended up walking away from the offer. We didn't feel comfortable with it.
On the good side (from the sellers perspective), you hold the deed until the terms of the contract are satisfied, that is, until the buyers have completely paid the money within the time frame of the contract. Also, you as the seller can set the interest rate, within reason. There is an upper limit (probably state laws vary on that limit?) But I remember being advised by our attorney that we couldn't set the rate higher than XX.XX%, and thinking that XX.XX% was plenty high.
On the down side, the buyer is probably asking for a seller financed mortgage because they either 1) cannot get traditional financing, 2) are worried that they can't get traditional financing or 3) some other reason that is probably a red flag for you.
So, I would advise that as you enter negotiations, you at least set the interest rate at some point greater than what the buyer could get at the bank. That sets an incentive for them to try a little harder to get traditional financing from a bank. You can also set up the land contract for say 5 years on say a 30 year amortization, and at the end of that five years, the buyer is expected (required by the contract) to attain commercial financing, like a balloon payment to you. That five years gives them a chance to clear up their credit if they need to, and also draws down the amount that they would have to borrow from the bank, because they will have (presumably) been making principal payments to you.
Also, I'd advise that you see a lawyer who is knowledgeable about real estate transactions, and have them write up the contract. They will spell out all the terms of default, what the buyer is allowed to do during the contract period (things like reasonable maintenance, painting, normal things) and things the buyers cannot do during the contract period (completely remodel a bathroom, take in renters, whatever things that you do not wish to happen while you still own the house. Because, remember, until the terms of the contract are satisfied, it is your house. If they default in payment, you get the house back, and you have to get them to vacate the property. The terms under which they default in payment must be clearly spelled out, and agreed upon.
They good news is that if they default in payment, you keep all the money they've paid, and you get the house back. The bad news is, you get the house back.Comment
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Well, the sale fell through anyway, so I guess it is all moot now.
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It is an importent factor to find right mortgage lender whily buying a home. If your home seller is acting as mortgage lender then you should talk with your real State agent on this topic.Comment
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Yes, in seller mortgage seller act as the mortgage lender. In this buyer and seller execute a promissory note about the interest rate, repayment schedule and the consequences of default. The buyer has to send the monthly mortgage to the seller to pay the mortgage and seller get interest on the loan.Comment
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Home owner carried home mortgages also come with a number of drawbacks. One drawback is that you're continue to the home's lawful owner and will be for a long time. You could end up with harmed properties if those buyers prove to be untrustworthy. A last drawback is that it can be challenging to evict or foreclose a defaulting buyer from the residence.Comment
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Seller carried mortgages is normally a concept about, when a home seller carrying a mortgage for a home at the place of the buyer, it helps the buyer to purchase a seller's home.Comment
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Seller carried mortgage in nothing but only a concept when the seller takes the responsibility of buyers mortgage for helping him to buy a house.Originally posted by LuckyRobin View PostComment
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