Home sellers need to be aware of certain important details when they decide to carry back a note in a real estate transaction.
When the complexities of traditional financing are removed from the sale of real estate transaction and seller financing becomes the solution, the process is so simple that it is easy to over look some of the details.
The only difference between traditional lending methods and seller financing is who the lender is.
The financing process should be the same in both instances but with seller financing it is easy for seller to get overwhelmed and lose track.
Sellers should follow the same process just as if a third part lender were involved.
Fires do happen and if you are the note holder of a property that just went up in flames, you want to have piece of mind that the payor has adequate property insurance to cover for the loss.
If property insurance with adequate coverage has not been put in place then you just watched the collateral secured to your note go up in flames.
What are you going to foreclose on if the payor decides to quit paying you and walk away? The policy should designate the note holder as the Loss Payee.
This designation will ensure that the he or she is informed on the status of the policy and receive a certificate of insurance with each renewal.
Every year the note holder should insist that the policy be renewed with adequate coverage for property loss.
Often when seller financing is the solution to a real estate transaction, the insurance policy is the item that is overlooked because it is the responsibility of the payor.
Note Owners should require home buyers as a part of the contract to purchase adequate property insurance.
Selling a note that does note have adequate property insurance or no insurance at all would be very difficult to sell on the secondary market.
Expect to take a deep discount if a seller is willing to purchase without insurance.
This is why it is so important to have a note professional on board to verify each element and protect the structure of the note and the creator.
Story: The Texas Note Company recently assisted a customer with the sale of an owner financed note in Pflugerville Texas.
A mobile home note with land.
The note had a face value of $50K with a balance just over $42K.
We were able to give her a full purchase offer for the note which she accepted.
She provided us with all the necessary documents we needed for the sale of her note.
Deed of Trust Note Document Warranty Deed Settlement Statement Property Insurance Social Security Numbers of the payor Payment History with Bank Deposit slips Pictures of the property (Just a little note: If you are considering selling your note or want a note quote we will need these documents t) Upon reviewing all the documents it was determined the the property insurance policy was only for $5,000..
This was an issue because if the home burned down or was destroyed the home owners policy would have not been able to replace/rebuild their home with just $5,000.
The risk to an investor would have been to great and to find a buyer without the proper coverage would have been very difficult.
If the home was destroyed and the payor walked away what would be left to foreclose on? This story ends well, Texas Note was able to work with the payor and their insurance agent to increase the amount of the policy to the required level of $45K at a cost increase of just a dollar a day to note payor.
Additionally, we amended the Deed of Trust to include the clause that the proper amount of property insurance must be maintained each year.
Then the deal was closed and the note seller received a lump sum of cash.
When the complexities of traditional financing are removed from the sale of real estate transaction and seller financing becomes the solution, the process is so simple that it is easy to over look some of the details.
The only difference between traditional lending methods and seller financing is who the lender is.
The financing process should be the same in both instances but with seller financing it is easy for seller to get overwhelmed and lose track.
Sellers should follow the same process just as if a third part lender were involved.
Fires do happen and if you are the note holder of a property that just went up in flames, you want to have piece of mind that the payor has adequate property insurance to cover for the loss.
If property insurance with adequate coverage has not been put in place then you just watched the collateral secured to your note go up in flames.
What are you going to foreclose on if the payor decides to quit paying you and walk away? The policy should designate the note holder as the Loss Payee.
This designation will ensure that the he or she is informed on the status of the policy and receive a certificate of insurance with each renewal.
Every year the note holder should insist that the policy be renewed with adequate coverage for property loss.
Often when seller financing is the solution to a real estate transaction, the insurance policy is the item that is overlooked because it is the responsibility of the payor.
Note Owners should require home buyers as a part of the contract to purchase adequate property insurance.
Selling a note that does note have adequate property insurance or no insurance at all would be very difficult to sell on the secondary market.
Expect to take a deep discount if a seller is willing to purchase without insurance.
This is why it is so important to have a note professional on board to verify each element and protect the structure of the note and the creator.
Story: The Texas Note Company recently assisted a customer with the sale of an owner financed note in Pflugerville Texas.
A mobile home note with land.
The note had a face value of $50K with a balance just over $42K.
We were able to give her a full purchase offer for the note which she accepted.
She provided us with all the necessary documents we needed for the sale of her note.
Deed of Trust Note Document Warranty Deed Settlement Statement Property Insurance Social Security Numbers of the payor Payment History with Bank Deposit slips Pictures of the property (Just a little note: If you are considering selling your note or want a note quote we will need these documents t) Upon reviewing all the documents it was determined the the property insurance policy was only for $5,000..
This was an issue because if the home burned down or was destroyed the home owners policy would have not been able to replace/rebuild their home with just $5,000.
The risk to an investor would have been to great and to find a buyer without the proper coverage would have been very difficult.
If the home was destroyed and the payor walked away what would be left to foreclose on? This story ends well, Texas Note was able to work with the payor and their insurance agent to increase the amount of the policy to the required level of $45K at a cost increase of just a dollar a day to note payor.
Additionally, we amended the Deed of Trust to include the clause that the proper amount of property insurance must be maintained each year.
Then the deal was closed and the note seller received a lump sum of cash.
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