A Salt Lake City Real Estate Attorney Talks Seller
A Salt Lake City Real Estate Attorney Talks Seller financing. This is a follow up article to the one on Sellers financing the purchase of a home. A Real Estate attorney Thor Roundy taught a class on this topic to MediaOne REALTORS® and guests, other Utah Real Estate agents from a few different Salt Lake City companies. In this post I add some notes from his class. I believe it will add to the perspective offered in this first post, click here for it.
Some of this may be similar content to the first post, but I believe together they are helpful. First I restate my belief written in the first post, don’t enter into a seller financing arrangement without the counsel of an experienced real estate attorney. Thor Roundy and another I have recommended in the past are found in a link on this website under real estate attorneys. I will be glad to add others as you, the readers, share good experiences to me.
First Thor discussed risks home sellers take on doing seller financing. These can run into a few thousand dollars. Yes the costs are a consideration. When your buyer/borrower is delinquent you are without interest due to you. If you, the seller, carry a mortgage already that you don’t pay off, there is interest due to that lender which you are responsible for. Yes, he discussed many cases in which clients entered into a seller financing arrangement still owing money on the subject property. He discussed scenarios to make that feasible. There is the risk that your buyer does damage to the property. I add here that he offered several good reasons for seller financing on land. I have participated both as a real estate agent, and as an investor in land acquisitions. My previous article ignored land as a consideration. I have been involved in over 50 such transactions. One reason to, as a seller, to offer seller financing is when the buyer is planning on improving your property. They may be funding the costs to improve it physically or in zoning or other uses such as sub-dividing it. The time frames required to foreclose is a consideration and another reason to have the guidance of a real estate attorney. It can be as little as four months or as long as two years, depending on the structure of the agreement.
Here it was suggested by our principle broker, James Rankin, that a better option is a lease option. This often is the best approach and I can attest through the many of those transactions I have been a party to.
Warning, don’t do a deed in escrow process. If you don’t know what that means, well, don’t do it.
When you have an underlying obligation there is likely a due on sale clause in that underlying document, that loan may be called in, another reason for the involvement in an experienced real estate attorney, Am I over selling this attorney part? No.
There are reasons to have the subject property, especially when you are the buyer, transferred into a family trust.
Note, there is an actual appropriate addendum to the Utah REPC, real estate purchase contract. Make sure you use it as the foundation to a seller financed transaction.
So, with all the risks involved, what other reasons are there to do seller financing. Obviously the first is when the seller is motivated to sell and having difficulty otherwise. The seller may also not be receiving offers at the price he or she wants. Seller financing can come in handy. It isn’t just the buyers credit, it could be the buyer can’t qualify for other reasons, such as time on the job, or being recently self-employed. There are times the seller wants to sell the property or properties to existing renters. The goal may be to not only get a higher price, but a higher interest rate than could be earned with the proceeds.
Finally, make sure you know the credit report results of this potential buyer. The more money that they pay down the better your position will be. And lastly, did I say this already; keep an experienced real estate attorney involved during all steps of the process?
by Larry K Cragun, REALTOR®
MediaOne Real Estate, Utah
4770 S 5600 West Valley City, UT84118Phone: 801-204-6000 URL of Map
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