I have a potential owner financing deal and I have a question about the contract. Would I be doing a owner financing addendum/promissory note and a purchase and sale agreement? This would be my first owner financing deal, so any other tips would be extremely helpful.
The only difference in the contract between an owner finance and a cash deal or conventional financing is the section of the agreement that relates to payment of the purchase price. Whereas you would ordinarily indicate earnest money, down payment, financing and total purchase price... in an owner finance deal you would spell out the exact financing terms such as:
Seller agrees to finance $x of the purchase price at y% interest over z years, secured by a first lien deed of trust. Of course this is the simplest format... yours may be amortized over 30 years but with a balloon payment at 5 or 10 years, etc. The seller would either have his/her attorney prepare docs or you could ask the closing attorney/title company to prepare the Note and Deed of Trust for an additional fee. Good luck.
I've never done one in MD, but here in WA I use a 'Method of Payment Addendum.' It's pre-printed with fill in the blank portions as to DP, rate, term, etc. The title co sends that to their network attorney to draft the note and deed of trust. Usually costs about $300. Maybe the standard MD PSA has a similar addendum available?
I also designate it will be held with a loan servicer at x local bank. Settles seller fears big time. Good luck!