Has anyone sold real estate and carried a mortgage for the buyer?
Any luck with this or do you feel you are stuck with it?
Answer:
Been there, done that. The only time I would ever consider this is if you own the property free and clear and you collect a substantial down payment. Other wise, your mortgage lender would need to sign off on any change of ownership.
The best way to proceed is to first off have the sales contract written up by either an attorney or an real estate agent (for their liability insurance). You can choose to either sell the place outright with your self as the first mortgage trustee, or you can do a land sales contract.
1) The mortgage trustee allows you to sell the place to them, and they transfer it into their name. This way you relieve yourself of some of the liabilities of being a property owner ( insurance, taxes,.)
2) The land sales contract, you retain ownership until the final payment is made. You also retain the ultimate responsibility for taxes and insurance.
Either way, you are better off to set up an escrow account for the collection and disbursment of the payments. You can make the buyer responsible for this as part of the sales agreement. You can also include in the sales agreement that the buyer is to pay into an escrow account for the payment of taxes and insurance. This can be figured into the monthly payment price.
The advantage to #1) is that the property is no longer a financial liability for you, and is actually an asset. If for some reason they default, you would have to go through the foreclosure process.
The advantage to #2) is that if they ever default, all you would need to do is evict them like you would any tenants.
Which ever way you are considering, contact a proffesional to get the proper legal aspects and laws for your state. If you have any inkling that the buyers may have financial difficulties in meeting the payments, don't do it.
A member of my family did. I do not suggest it, its kind of stressful as you are going to be waiting on that payment every month. What if they're late? Its a bit of a pain to worry about. However, if its the only way to sell the place, you're better off.
Don't do it.
Or if you do, as soon as they begin to lag behind or come up with excuses for the lateness of the payment, shop the mortgage around to a broker.
If you are adventurous and are going to do it anyway: make sure you get title insurance, hire a title company to handle the payments, get tax insurance. Make certain that the title company sends you a complete statement every month (you will pay a small monthly taxdeductible fee), notifies you if buyers are late in payment or property taxes (they will check annually). Get the tax insurance co. to send you statements every half year showing that they are up to date in their taxes AND MAKE SURE you get the buyer to hold property insurance and send you ongoing proof that they are current with their payments. Make ALL these things part of the BINDING CONDITIONS of the sale.
If you don't do this, you will have no recourse if/when the buyers cancel
their house insurance, are constantly late in their payments, or don't pay property tax and the property is sold. There are areas in California where bent realtors are in cahoots with people who buy properties and get the previous owner to hold the mortgage, don't pay the taxes, snap the property up at a tax sale.
ALSO
make sure you understand the conditions that need to obtain if/when the buyers default, and you get to repossess your property.
Good luck. Let the bank handle it so you can sleep at night.
Why do you think they want you to carry a mortgage?
Because they can't get credit (or enough credit) anywhere else. They are a bad risk. Their likelihood of defaulting is too high for lenders to accept. An industry which pays billions of dollars for risk modeling is saying that these people are a bad risk.
Unless the price they offer is too good to resist, and you have the cash to make it happen, and the expertise to foreclose if they default, don't do it.
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