Seller Held Mortgage Seller Financing

5 Replies

Hey BP Fam,

I'm hoping to get some input/guidance here concerning seller financing a piece of land. I am looking to seller finance a .5 acre lot.

Is it necessary to find a someone to service this mortgage. I'm looking to sell it for about 11k, $3500 down and flat payments for 3 years. It seems like using a law office or real estate office to service will cut into my profit quite a bit. I consulted with my title agency and they will close but won't hold the mortgage. Basically I'm wondering if it's possible to write up some sort of agreement to bypass finding a servicer to facilitate this note that is on the smaller side. Thank you for reading and your time. Take care and be well

You can service your own originated mortgage if you are willing to take on the work which would include collecting payments, paying taxes & insurance if any and filing tax info.  You would be on your own in the event of a default/foreclosure.  You need to be in compliance with all lending laws, so you will need to be aware of them.

Caveat: I don't know FL law and maybe there is something in FL that requires a 3rd party.

Jim.

@Troy Norwood :  Hello Troy.  Congratulations on your sale.  There are several ways to tackle your situation.  Very often the buyer is responsible for paying the fee's for servicing.  They can also be split between the buyer and seller or paid by the seller covered by adding to the sale price to cover in the contract.  It all depends on the agreement you reach and what that agreement says. 

If you decided on a simple collection of payments only you would be looking at $100 set up and 36 monthly payments of $15.  $100 + 540 = $640 total cost. 

If you wanted to add the impound account to pay insurance and taxes you would be looking at $100 set up, $60 impound set up and 36 monthly payments of $23.  $100 + 60 + 828 = $988 total cost.  Plus both the seller and you would have 24/7 individual web access to track the occurrences on the account.  That way all IRS reporting would be covered, a neutral third party would be collecting and your private financial info would not have to be disclosed to the buyer.

We are licensed in FL so if you would be interested in learning more please reach out to me.

Thanks...and good luck on your sale.

Updated over 1 year ago

I mistyped...both the buyer and you would have access to 24/7 website information on the account.

Generally, If you are the owner/seller, you only do this one sale in a year, your only note, you're exempt from servicing requirements under Dodd-Frank but not under Fair Trade Practices, Fair Credit and Collections, it's not hard to be compliant there and if you have any collection problem turn it over to a pro or attorney. 

Use a joint bank account, you have withdrawal the borrower has deposit authority, the bank deposits will be the record of payment. You will need to provide a 1098 interest paid filing to your borrower, get that at your IRS office or have your accountant do it.

The closing agent will take care of tax filings on your gain and settlement. You'll pay tax on the gain of the sale at 25% of the liability at settlement, the other 75% will be deferred as received as a % of principal paid and you'll have interest income. 

Investors seller financing as a business or selling more properties or having larger note portfolios fall under the compliance requirements.

Check with your attorney and tax person as well as state law. Good luck :) 

Hey Troy,

What did you decide to do with seller financing that property?

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