Posted by Monique on March 22, 2001 at 17:52:33:
William,
I had a related question about a month ago and got some good advice from several folks.
Here’s how to handle the payments, in order of my personal preference:
- Agree to pay the underlying mortgage directly and pay the seller the difference
- Agree to pay a third party escrow company the full amount and they send the underlying mortgage payment and the difference to the seller. Have the seller pay the monthly escrow company fee (or agree to pay half).
- Agree to send TWO checks to the seller. One made out to the underlying mortgage company and one made out to the seller for the difference.
- Agree to send the full amount to the seller … ONLY if the Seller will give you the lender name, loan number, and SSN so that YOU can verify that the payments have been made each month.
Actually, you will want to the get the lender info in all cases to verify that payments are applied on time and correctly, that the taxes and insurance are paid when due if these are escrowed, etc.
Also, be sure to include a provision in the note that allows you to pay the underlying mortgage directly if the seller does not pay (under options 3 and 4). Also, have language that says the seller will be penalized if a payment to the underlying is late or is not made – maybe 2 for 1. That is, for every $1 that the seller does not pay to the underlying mortgage and that you have to pay, $2 will be credited toward the principal paydown on your loan.
My $0.02
Monique