Seller worried about liability on seller financing

4 Replies

I’ve recently talked with two different sellers. The main reason they’ve cited as not being interested in seller financing is because of “liability”. That is, the liability of someone getting hurt and also stricter landlord tenant laws. In my eyes, the biggest liability is trusting me as an investor to generate cash flow. As the new owner it would be my liability if someone gets hurt. How do I explain this to the seller’s agent in a non “logic bully” way?

@Bradley Dosch explain to them that title transfers to you, so they are no longer the owner. They would have as much liability as a bank has, which is none. They need to record the mortgage and be named on your insurance. Their risk would be if you stopped paying or dropped insurance. That risk is limited to loosing the asset. 

Originally posted by @Bradley Dosch :

I’ve recently talked with two different sellers. The main reason they’ve cited as not being interested in seller financing is because of “liability”. That is, the liability of someone getting hurt and also stricter landlord tenant laws. In my eyes, the biggest liability is trusting me as an investor to generate cash flow. As the new owner it would be my liability if someone gets hurt. How do I explain this to the seller’s agent in a non “logic bully” way?

If you utilize a Promissory Note and Deed of Trust (in WA State) the prior owner is completely removed from title. There's no landlord-tenant exposure or risk if someone is injured at the property. 

Some people assume seller financing means a land contract or contract for deed. Those work more like an auto loan, where the seller retains title until the financial obligation is paid off. Sellers carry greater exposure in these scenarios. 

Give then an example of a slip and fall on YOUR property that they owner financed. No one is going to ask you what bank financed the property so that they can sue the bank. They want to sue the owner of the property. You, as the owner, will have $1,000,000 liability insurance if something like that happened. The bank will never have any liability as the lender.

ps the seller is the bank.