Seller holding note?

Question

What are the advantages/disadvantages of buying a property (duplex) and having the seller hold the note as opposed to conventional financing?  Is there anything I need to watch out for as the buyer?

Jon Holdman · Answer

You want to be sure the seller isn't going to leave you high and dry if they have a note they don't pay.  If its free and clear, then no problem.  If they have a lien, I'd insist on paying that lien directly.  Do the transaction with a title company to avoid any surprises.  Advantage is that its usually not shown on a credit report.  May not be as strict with qualifications.  You would normally have to deal with taxes and insurance on your own, which I prefer.  I bought my first house many years ago using seller financing.  It worked out fine.

Richard Warren · Answer

Actually the insurance and taxes can be escrowed if a servicing company is used.  I use Note Workd Servicing, a division of First American Title, to service the notes I hold.  They escrow taxes and insurance and verify that insurance is current. They also handle tax reporting. The fee for this service is paid by the buyer and gives me peace of mind.

:cool:

Will Barnard · Answer

Disadvantages: You may pay a higher rate, then again you may not turning the only disadvantage into an advantage.

Advantages: Jon mentioned some, the fact that you may get a lower rate, not on credit report (unless you default), low to no clsoing fees, no 3,000 page docs to sign from lender, banks (the current enemy of the people) make no money off you - probably the biggest advantage by the way!