Collecting payments for seller-financed sale?

Question

Who do you like to use for seller-financed note management (drafting the promissory note and deed of trust, and collecting and disbursing the payments)? This is our first time selling our rental property as seller-financed, 20% down, 5% interest and a five-year buy-out…. Our accountant said “just find a collection agency”  but so far they seem a little sketchy, and we’re thinking we need a real estate lawyer also…?  We appreciate your advice and recommendations!

Matt Devincenzo · Answer

To help shorten the search...

Allied Servicing (WA based) https://www.allservicing.com/Home/Index

Madison Management https://www.madisonmanagement.net/

Evergreen https://notecollection.com/

AHP https://ahpservicing.com/

And there is an old thread with a list of quite a few more here:

https://www.biggerpockets.com/forums/70/topics/921180-lets-h...

Ollie Wright · Answer

Look for a 'third-party servicer' rather than a collection agency. Someone like Allied or Evergreen (or check Matt's list) handles the 1098s and tax reporting properly. It would also make the paper way easier to sell for a lump sum later if you ever want to cash out.

Mona Al-Haddad · Answer

I'm sorry if that wasn't clear, @Bill B.: it was the collection agencies giving my husband the sketchy vibes when he was researching how to collect the payments for the loan.... Thank you so much for the term "loan servicing!"  I think that may be what we need. From your tip we also found the term "note servicing," which I'm guessing is the same thing. So helpful!... And we also appreciate your comment about having the buyer pay all servicing costs. We'll be sure to have that in the contract.... To answer your other question, the potential buyer is purchasing as an investment.

Thank you again for your help. :-)

Mike Grudzien · Answer

Use an Escrow Company.

Bill B. · Answer

I used US loan servicing out of Nevada. Make it’s part of the contract that the buyer will pay all servicing costs.(it’s not much, $50-100/mo but the 5% interest rate is already a gift, might as well save yourself $3-6k over the life of the loan. The title company should be able to write up the note, it didn’t cost me any extra.

Make sure you lay out late fees, penalties, default interest and the such.

Ps just reread your post. I don’t like that your accountant didn’t know better. But I really don’t like that you’re getting “They’re sketchy vibes” already. You might be better off talking to someone about selling them an option to buy instead?  Make sure everything is done in their names, not LLC’s, they personally guarantee the debts, have good credit and assets, and so on. Is thsi for their primary  home or an investment? I’m probably being paranoid but sketchy is almost never good.

Collecting payments for seller-financed sale?

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