Seller financing how the money gets transferred?

Question

I've been listening to several of the BP podcasts mentioning seller financing. It's sounds like a great tool at times. What I don't understand is how you get the money to people.

let's say you buy a 100k house on seller financing with 0 down and 1k a month payments. Am I mailing a check to the seller every month?

pace Morby tells a story about buying a truck on seller financing, how would he make payments on the truck?

Chris Seveney · Answer

When doing seller financing, it is imperative to have a third party licensed servicer handle the payments. They will keep track of the amortization as well as provide all required tax forms at the end of the year. You will read stories here on BP where servicers were not used and the lender went dark, and the borrower has no place to send money to and cannot refinance or get a loan removed. Always use a servicer.

Personally seller financing a car is just dumb, if someone cannot get financing for a car, then they have awful credit and why would you lend to them?

Michael Smythe · Answer

The seller replaces a bank, so yes you'll have to send whatever payments are required to them.

Ned Carey · Answer

@John Currey yes in simple terms you simply send a check to the lender (former owner) or to his or her loan serivcer.

However as @Chris Seveney mentions, there are alwys Gotchas in real estate. He points out one I wouln'd have thought of. This is an example of the risk in real estate that people like Pace Morby don't bother to explain.

If  you are intersted in notes and seller financing Chris is a good person to follow here.

Dave Skow · Answer

normally a  company  or  intermeidary  will be used  to facilitate the payments  etc ....

Jamie Bateman · Answer

@John Currey I'm happy to answer servicing questions. Feel free to send me a DM to learn more about how my company might be able to help you.

@Chris Seveney, I still can't get over that you are the #1 All Forums Contributor. Well done, sir.

Chris Seveney · Answer

@John Currey

@j@Jamie Bateman can assist with servicer

A servicer is a third party that collects payment

Think of them like a property manager on a rental. They are the go between for the two parties (lender and borrower)

Eugene Nilus · Answer

@John Currey, essentially it's between you and the seller in case you are buying it.

In your example, the house needs to be free and clear if you are buying for 100K with 0 down and 1K a months. If house is not clear and still has mortgage on it, you can do sub 2 + seller finance.

In seller financing, the seller and the buyer create an agreement and the seller carries a note that the buyer needs to pay. The seller in this case is like a bank.They may also carry a deed if house is free and clear. (depends how you structure it).

You, as a buyer, need to send money to the seller each months (or whatever the contract says between S and B). The seller would need to provide you a bank account.

Using 3rd party services could be a good idea like @Chris Seveney mentioned above

Seller financing how the money gets transferred?

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