Seller Financing Question....for Notebuyers too - Posted by Paul_NY

Posted by Mark-NC on January 23, 2000 at 23:34:41:

For the most part, depending on who the note buyer is it shouldn’t be a problem. If you are worried about colateral ask them if they have anything else of value you could put a lien on. Or see if they want to trade your second for anything of value. I have done this on occasion. Let me know if you need help.


Seller Financing Question…for Notebuyers too - Posted by Paul_NY

Posted by Paul_NY on January 23, 2000 at 21:44:20:

I’m selling a single family home on a Land Contract. The buyers have agreed to make a down payment of just under 5%. The 1st mortgage is for 80% of the selling price.

The buyers asked if the remaining 15% could be a personal note not secured by the property. This would allow them to borrow money to improve the property

I’m ok with that since they want to make the property payments via payroll deduction AND own another house. (My house will be their primary residence)

Is this unsafe for me? What advantages will the buyers gain over my position? Will it make the 1st mortgage unattractive to potential note buyers? Are there any special clauses that I should add to the second mortgage?

Thanks in advance

Re: Seller Financing Question…for Notebuyers too - Posted by DanM(OR)

Posted by DanM(OR) on January 24, 2000 at 10:42:07:


I actively invest in notes and homes and this deal is pretty common. However, I wouldn’t do this unless it was secured by some sort of property. A note really is only as good as the property it is secured by. Unless these folks were a family relative you really have no interest in complying with them.

You should always prepare for the worse case scenario. Everything in RE is Risk vs. reward. In this scenario you have all the risk and not all the reward.

If they own another property, ask them if the second could be secured by that property. That would allow them to accomplish what they are trying to do.

Make sure that there is enough equity in that home to secure you. How much is enough depends on your comfort level. I wouldn’t go higher than 85% of the value. Consult a realtor or real estate attorney to do a deal like this.

Best of luck on this!

Dan Matejsek