Seller financing question what to do now? Payment is overdue.

12 Replies

Hello BP! I did seller financing for the first time on a property I inherited. I sold the property for 18k and the borrower owes about 12k. The property is in AK and I lIve out of state. The borrower has been getting later and later with payments to the bank that manages the mortgage for me. At this point they are over 30 days late and are ghosting me when I try to reach out via text or phone call. My paperwork shows I can forclose after 30 days. My question is, where do I start? Thanks in advance for any thoughts or recomendations! -Ryan

@Ryan Ellis : If it is in writing, then follow the terms and conditions that were agreed upon.  What is the complete role of the bank?  Will they help with foreclosing or are they strictly just managing the money?  Check with your attorney on how to proceed.

In my mind... and perhaps the borrow may be thinking the same thing... if you're in Ohio and they are in Alaska... how much money are you going to spend to make the situation right when the outstanding balance is at $12k?  One round trip flight is at least $600 (not sure where in Alaska the property is), legal fees, your time, etc.  Only you could really answer that question.

Speak to a RE attorney local to the property.  Your note/mtg can say anything it wants, you still have to follow state/federal law and procedures.  

BTW, was this a straight sale and financing where you hold a mtg, or is it some kind of land contract deal?

@Anthony McEvoy Thank you for the quick reply. The land is close to Anchorage. The bank is strictly managing the money. I spoke to them and they will deny payment the payee is past 30 days if I authorize them to do so while starting the foreclosure process.

Good news I’m from there, get up there often and have a network. It looks like I just need to call an attorney and let them handle it.

Is there a Deed of Trust or Mortgage Document filed?   These usually call out how a foreclosure would proceed...Judicial or non-Judicial.   Does the bank have a process to proceed with a foreclosure?

We have only had to foreclose once on an Seller Financed Note and the process was called out in the Deed of Trust (we are in Texas).

If the bank does not have a process, there are usually 3rd party real estate attorneys or firms in every city/county that will execute a foreclosure and eviction (if needed) on your behalf, for a fee of course.

Good luck...

Consider finding a local buyer for the note or hire an attorney to deal with the POTENTIAL foreclosure.  I say potential because in many states this would probably not get to a foreclosure at this point. 

@Ryan Ellis - Hire an attorney to start the foreclosure. Hopefully you had a Deed in Lieu signed when you closed the sale so you don’t have to go through a full foreclosure. The attorney will need all your sales paperwork, your payment ledger, and any denand notices you have sent.

@Ryan Ellis & @Account Closed : I was thinking the same thing but did not want my post to get too long... with your network of people in the area, see if someone else would be willing to take it over (either sell the note for them to collect or evict and occupy).  Heck, even if you sell out at $8k or $10k... the headache is gone.  The beauty is you inherited it so you aren't worried about offloading it for equal to or more than what you still owe on it.

@Ryan Ellis Check with the local state laws for foreclosure and search some local foreclosure attorneys. If they are over 30 days send them a certified letter letter them know that if their payments are not caught up you will forclosure by a particular date. I’m not an attorney but that’s a good start

Not to hijack this thread, but I wanted to ask how a deed in lieu of foreclosure would work in a non judicial state.

If borrower agreed to this would the lender be able to get possession of the property back quicker than a mortgage that did not have this provision?

Originally posted by @Rich Hupper :

Not to hijack this thread, but I wanted to ask how a deed in lieu of foreclosure would work in a non judicial state.

If borrower agreed to this would the lender be able to get possession of the property back quicker than a mortgage that did not have this provision?

 Yes. You could do a DIL in a judicial state as well (simple stipulated agreement). DIL's are a great option if there are no other nasty liens out there beyond the subject lien.