Seller financing? How does it work?

5 Replies

If the owner of a property still owes a balance on their mortgage do they have the option of seller financing in any way? What creative way can be used to obtain a property like this? 

One method is to take over the mortgage payments while it stays in the sellers name in a subject-to transaction.

All inclusive trust deed or Wrap financing. More of a commercial thing and some loans will have a due on sale clause the lender could call in. 

best advice is make sure mortgage is paid off. clear title. but negotiable terms but most terms will be 20% down for ten year at 7% interest only. amortizing at 25 year if your lucky.

@Rigo V. I always recommend people to pay it off - reason being is what if the current owner gets an IRS lien or a judgment against them when your subject to. It can create a world of problems for you. Best to get it paid off and then own the home and have them carry the note.

If you buy a property Subject to the mortgage and the deed transfers out of the sellers name, any judgements or liens AFTER the closing will not attach to the property because the deed is no longer theirs to attach to. Just because the loan is still personally guaranteed by them and on their credit report does not give anyone the right to attach. The lender CAN call the loan due and foreclose if they choose to. This almost never happens. Do NOT take over a property subject to if you can not afford to make the payments and if you do not have a way of paying off the loan IF it is called due.

That said, I really like buying this way and after you get educated on the proper way to do it, you can help people and get great deals with little cash out of pocket.

Happy Investing

Derek Dombeck

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