Investor · Richmond, VA · Member since 2013 · 347 posts · 191 votes
I am considering doing seller financing to sell a home that I own out of state. I have been reading up on the Dodd-Frank requirements, etc so I know that I need to document the ability to pay and meet other rules even though this will be my one and only seller finance deal.
My question for this forum is about the tax and insurance payments. I am concerned that the buyer might not plan ahead well enough to make the annual tax payments. I don't want to wind up with a tax lien in front of my mortgage. Can I set up an escrow arrangement and pay the taxes from those funds? I could do the same with insurance since I also wouldn't want them to let the insurance lapse and then wind up with no collateral on the loan.
I don't know the details of this relating to Dodd-Frank, but here's what I have done. In the paperwork (land contract, or contract-for-deed in my case), I included provisions for my tenant-buyers to have insurance and taxes included in their monthly payments to me. So, in a sense they were "escrowed". Although I never set up any separate account. I just paid the insurance and the taxes myself. But they monthly payments that I was receiving included the extra money from the tenant-buyers to cover the taxes and insurance.
Does anyone else have any experience or good advice in this area? I am also looking at doing seller financing and obviously want to make sure the property is properly insured and has the taxes paid. I am a licensed, so I don't think I can use the same approach Bryan used. Any thoughts or advice appreciated!
Hi @James Sigsbee -- I've been looking at this some more and I may wind up using a loan servicing company. The fees are $30 per month total if you do an escrow with a small initial setup fee. The reason I decided to do that is I may want to sell the note in a couple of years and it will be more valuable if it has been professionally managed all along.
I found a couple of good threads on BP searching for "loan servicing" including this one:
Thank you @Shera Gregory! The link you provided was very helpful. While I don't have immediate plans to sell the note, that is a great point about the potential marketability of the note if I change my mind later (i.e - a better opportunity for the capital comes up). Best of luck to you!
I know this is an old post but I'm in the process of a seller finance deal and was considering setting up for escrow for taxes and insurance however, would like to ask the Pros here on BP who's done this before to see how that's done. Does the seller just open up an escrow account with a bank or does the buyer open it up? Kind of confused about this as I've read that the escrow account belongs to the buyer yet seller is the one that would be withdrawing from the account to pay for the taxes and insurance on behalf of the buyer. Any input on this would be greatly appreciated.
@Jay C. There are companies that provide escrow services in most cities. The buyer pays the monthly fees and the escrow service makes sure the insurance and property taxes are paid. You can ask your title company if they can recommend a local company, or you can search for a national firm