10 Thoughts on Seller Financing from the Lawyer Drafting the Documents. Per Real Estate Lawyer Colin Newberry on the AREA Facebook Group
10 Thoughts on Seller Financing from the Lawyer Drafting the Documents. Per Lawyer Colin Newberry, posted on Facebook Real Estate Group, AREA the original Austin Real Estate Alliance
1) Most Seller financing deals are amortized at 20-30 years, but Balloon (become due in full) in 3, 5, or sometimes 7 years.
2) It is extremely rare to have the Seller be responsible for Escrowing Taxes and Insurance (D3 of the TREC Seller Financing Addendum).
3) Most Realtors don't know to have their Seller Financer have a Lender's policy added on the Title Insurance.
4) Interest Rates are all over the place for Seller Financing--Higher than Market if it is being done for someone who can't qualify for traditional financing, lower if it is an enticement to get a house sold.
5) Wrap mortgages/Subject-to Mortgages are extremely risky on both sides and not recommended for anything but investment properties, and really not even for that.
6) A Seller Financing deal should (on the Seller side) either not be assignable or should have SOMETHING filled out in Section A of the Seller Financing Addendum to ensure you're not loaning to a risky borrower.
7) Financing to an entity requires a personal guaranty.
The Addendum document is not the Loan Package, you have to get those drafted up by an attorney. (True story-I had an agent call at the closing table confused why they couldn't record the Addendum as the seller financing loan package).
9) Seller financing and Family Financing from the Buyer side result in the same document set, but Family Financing is under a Third Party Financing Addendum.
10) Lastly, Seller Financing is extremely popular right now, behind only Seller Buydowns.
As always I am always happy to talk about this subject or anything else my AREA People need. If there is enough interest I also would be happy to do a Lawyer Perspective on Seller financing zoom/facebook Live/Moving picture presentation.