How to Create Seller Finance Loan Documents
Seller Financing is a great tool that can put more money in your pocket when you sell a property and help you sell faster especially when market slows. Last month we discussed some tips on how to create seller financing terms as part of your property sale contract.
Once you have negotiated the final payment amount your buyer can afford, interest rate and the length of financing that you will provide and are headed to closing, you will need closing documents that include the loan you are giving. If you are not already an expert in this form of financing for the property jurisdiction, the best places to turn for help creating your loan documents when you are using seller finance are:
- The title company closing the sale can prepare documents. They will have an attorney who can draft documents that are as expected for both parties usually for a few hundred dollars. Even more importantly they will sell you a Lender’s Title policy that gives you recourse if the loan becomes uncollectable due to an error they made (e.g., an error in documents.)
- An attorney in the jurisdiction of the property. They will represent and watch out specifically for your interests in creating the loan documents. Also, some states require attorney closings and many attorneys also can provide title insurance. Where attorney closings not required you can submit attorney loan documents to the closing title company.
- A Licensed Mortgage Originator (LMO) in your state. When you are selling to buyers occupying property as their principal home, especially when you do more than 1-3 transactions a year, you must comply with many regulations that come into effect. You should become familiar with Dodd Frank Act and High Price Mortgage requirements at federal level for all 50 states, and with the SAFE Act provisions that apply in state of your property being sold. Loans other than on principal home of borrower are free of most regulations.
Remember, you, as lender, want the maximum that buyer can afford in payments, and highest legal interest rate borrower will accept to make your loan give you the best return. You can request more info on creating terms at the “Sell your home faster… “ link on our website, www.NationwideSecuredCapital.com.
Make sure your loan documents Include essential terms. You may forward your draft loan documents to us at Help@NationwideSecuredCapital.com with your request for a courtesy review. We will advise of any omissions, errors, or suggestions we see to improve your loan documents.
Seller financing offers an Added exit strategy to real estate investors and businesses. You can sell the loan for cash. There is an active market of buyers for these loans should you need cash out. Nationwide Secured Capital will make offers to buy part or all your seller finance loan enabling you to convert it to lump sum cash quickly.
Chris Sexton is a co-owner and Sr. Vice President of Note Purchasing at Nationwide Secured Capital, a reputable note brokerage and investment firm that purchases seller finance loans. Chris has been buying and brokering notes in the seller finance loan industry since 1987.