Selling Home ,Opinions???

Anyone one ever held a partial mortgage on a home sale?I did once on my last sale 14yrs. ago for 4K.Got about 3-4 payments and that was it.Figured sooner or later house would be bought and mortgage held was legally recorded in county and somebody would have too pay me my money to get a clear title.Yeah right keep dreaming.Now I have a chance to sell existing home and hold a 30k mortgage for 2yrs.with 100k up front.If I even considered this offer what are the advantages and pitfalls.I know I can run all this through my lawyer,but I was looking for some personal opinions or anybody that has done this type of transaction.

Thanks
Stan

I'm not sure I fully understand the term partial mortgage. If you mean you hold the first mortgage and they make payments to you, absolutely. As long as they put enough down to make it worthwhile and pay decent interest that's the way to sell right now with these low interest rates on savings. I hold quite a bit of private paper, land, houses, vehicles, even a couple of personal notes. Its how I even out cashflow so I can live month to month.

It's up to you to make certain the lien is recorded. I am carrying the note on real estate I recently sold mainly to spread income that is limited as far as taxable S.S. income. Were it not for the I.R.S. circling overhead,I would draw every cent from my IRA to invest partly in mortgages. But guess what? Fedral law forbids me to carry a mortgage for anyone other than myself same as they forbid me to invest my IRA in the private sector unless I pay taxs on 100% of it first then tax me on any profit I make later. If you are saying the buyer will $100k down and you carry $30k,like I already said,I would love a deal like that. Just don't try to compete with bank interest. If thier credit was good enough they likly wouldn't ask you to carry it.

Stan, just have them sign a quit claim deed at closing with a 30 day grace period. Anytime there 30 days late, a neutral 3rd party files the quit claim deed then it's your place again and you go thru evictions as a landlord tenant problem.

All cut and dried at the time of closing.

Watch for a "due on sale clause" in your original mortgage too see if there's a problem using this method.

Huge advantage to sell this way but sucks to buy this way.

T_Bone

It's up to you to foreclose when the borrower defaults. As far what happens when a property is sold, it's not the county clerk's job to enforce your lien. If it shows up on a title search, the title company might refuse to issue title insurance, but if there's no record that you initiated foreclosure proceedings they might just let it go.

100,000. up front and mortgage 30,000. sounds like great deal to me...however for someone to pay off 30,000. in 2 years is a bit of a stretch. the good money is in extending the payoff for several years

I've had three such deals in my lifetime of real estate investing (25 years). In Ohio we call them land contracts. Best form of paper I've held.

Let's you earn interest well above "bank rates". Include the right to periodically inspect the property in your contract; and to have the right to approve any sell of the property to another party.

If it is the first mortgage go for it.if it is the second mortgage don't touch it. There is no such thing as a parchal mortgage it should be a mortgage regardless of how much they pay down that is just a down payment it is 10% or 80%. wether. You hold the first mortgage they pay 100,000 down the rest to be paid every once a month. if they go over 30 days you can file fore closer. Second mortgages aren't worth the paper they are written on. If the place is sold on the court house steps they get a clear deed. dont ask me how I know but I am about 10,000 short of what my life time income chould have been was an a costley lesion. Will not do that trick again an the guy that pulled the trick was supposed to be one of my best friends.

When I represent a home BUYER who wants to purchase on Contract, I advise the seller give them a deed and then take back a promissory note secured by a mortgage if the seller demands one. When I represent a SELLER I advise a land contract with no deed given nor placed in escrow and that the contract be NOT even recorded.

If you get 100K down, give them a deed and take a note for the 30K balance SECURED BY A FIRSTTTTTTTTTTTT MORTGAGE youre not in too bad of shape (if yours is the first mortgage and its recorded and theres no other junior mortgages) buttttttttttt youre safer if you enter into a conditional installment land sales contract,,,,,,,,,,,DO NOT give them a deed,,,,,,,,,DO NOT HAVE THE DEED PLACED IN EXCROW,,,,,,,,,DO NOT have the contract recorded,,,,,,,,and promise them a deed and free and clear title upon payment of the 30K

HOWEVER if they are paying that much down the buyer prob wants more protection and wont go for that deal (which is much safer for you) although its prefectly legal.

Be sure yours is the FIRST mortage and I wouldnt want any others,,,,,,,be sure the mortgage is properly signed notarized and recorded,,,,,,,,if they dont pay its up to you to FORECLOSE on their interest and theres likely a equity of redemption period,,,,,be sure the taxes are kept paid and the insurance and if not be sure you pay them (add to buyers unpaid balance)

NOTE this is far too important and theres wayyyyyyyyy tooooooooo much at risk so you need to consult a trained PROFESSIONAL a local real estate attorney AND DO NOT PLACE MUCH VALUE ON LAY OR EVEN UNRESEARCHED PROFESSIONAL (including mine for sure) "OPINIONS" POSTED HERE....

Best wishes n God Bless

John T Country Lawyer

Uncle was in similiar situation told the guy you come up with the $100 you can come up with the rest!!! Guy did!!! Check your state aws regarding mortgage escrow etc.

You can invest your IRA in private mortgages. You have to create an LLC, and have an "administrator" as well. No co-mingling of IRA and your private funds- if you have to foreclose, the IRA has to fund that, as well. Look into it- I have assisted in several such set-ups, and the return is sure a lot better than anything else right now.

Need more info- if the sale is $130,000, with $100,000 down and you carrying the balance, that's fine. If its some larger amount, with $100,000 down, a bank holding the first, and you holding the second mortgage for $30,000, you'll probably lose the 30K. Reason? You have no real remedy if he defaults on your 2nd mortgage. You would have to foreclose on him, and pay off the first mortgage- need a lot of financial horsepower to pull that off.

John T shares my philosophy on carrying paper. The seller is better off with a contract than a note and mortgage (or Deed of Trust): easier and cheaper to foreclose, and you get the property back, not a sale on the courthouse steps.

But we part company on not recording the contract- at least in Washington, you have to record the contract, or get big penalties- and you can't forfeit (foreclose on) the contract if its unrecorded. And awfully hard to find a buyer who would stand still for that kind of arrangement. As my dad used to say, "Anybody with enough money to make that deal is probably smart enough not to."

Its NOT required to be recorded here (unless its been changed) buttttttt as I say the Buyer would usually insist upon it or if I was advising him for sure. If repping the seller I dont want any notices or paper or recordation of any equitqable interest but the Courts have changed the commom law freedom of contract to the point where once the buyer has earned over 15% in equity the seller must foreclose just like a bank would.

I enjoy property law, its pretty well the oldest common law out there.

John T