Archive for June, 2010

Frequently Asked Questions About Seller Financing, Part 4

June 29th, 2010

Is it illegal to sell my property on a wrap around real estate contract if my mortgage is non-assumable?

No, it is not illegal and it is done quite often, but the buyer and seller need to know that it may trigger your due on sale clause in the mortgage. What really happens is that the mortgage company has the option to call it due if you sell the property. Incidents of called mortgages over the past 25 years have been extremely rare, but should be no indication of future performance. You should always consult a real estate attorney to fully understand the risks and responsibilities of the parties.

Do wrap around real estate contracts have special provisions that are different from non-wrapping contracts?

Yes, these additional provisions state exactly what the buyer’s and seller’s responsibilities are if the underlying mortgage should be called. The attorney preparing the documents will include these provisions for you in the real estate contract.

How do I get to see all the conditions of a real estate contract before accepting an offer?

You can see a sample of a real estate contract in the Forms Appendix of the free online book Real Estate Contracts in New Mexico. You can also ask your Real Estate Broker for a copy of a sample real estate contract.

How do I get the property back after the 30 day demand letter has expired?

The escrow company requires an affidavit of default from the person or attorney who sent the demand letter. If the escrow company deems it is a proper default it will release a special warranty deed to the seller from the buyer that puts the property back in the seller’s name. Once the deed is recorded it terminates the contract and if the buyer is still in or on the property they then become a tenant which means you can evict. Most leave before this.

Who pays the fees to the escrow company?

This is negotiable. The buyer can pay all, the seller can pay all, or the fees can be split any way they prefer. If it’s a wrap around real estate contract the buyer must pay 100% of all the fees.

How much are the escrow fees?

For Security Escrow’s latest fee schedule go to www.securityescrow.com/fees.

Will Security Escrow service real estate contracts that are on property other than in the Albuquerque area?

Yes, in fact over half of the real estate contracts we service are from outside the Albuquerque area.

What services does Security Escrow provide?

Security Escrow:

  • Stores the deeds in fireproof safes
  • Keeps an accurate accounting of principal and interest
  • Provides you with how much interest was paid or received for the year in January for tax return.
  • Supplies payment coupons to the buyer
  • Disburses all funds where directed by seller
  • Monitors accounts for demand letter deadlines
  • Pays annual property taxes and hazard insurance if provided for in the contract
  • Issues special warranty deed to seller in rare case of default
  • Sends the buyer the warranty deed when contract is paid in full.
  • And a whole lot more.

Frequently Asked Questions About Seller Financing, Part 3

June 3rd, 2010

As a seller, how do I let my realtor know I want to take advantage of seller financing?

When you are filling out the listing agreement ask your realtor to select the seller financing considered option under the Multiple Listing Service agreement.  Also ask them to advertise that seller financing is available.

How does a buyer go about finding properties they can purchase with a real estate contract?

Have your realtor search the Multiple Listings for properties offering seller financing.  Also, check the newspaper ads.  Just because sell financing is not advertised doesn’t mean you can’t make an offer subject to seller financing.

Who pays the property taxes and insurance?

The buyer is responsible for paying property taxes and insurance.  We suggest you have the buyer include these prorated charges every month with their payment and let the escrow company be responsible for seeing that the taxes and insurance are paid on time.  If you want this, and you should, it needs to be written into the purchase agreement so the attorney will include it in the real estate contract.

Do I need title insurance?

Yes, any real estate transaction should include the purchase of title insurance.  This is not a lease to own.  When the real estate contract is signed there is a transfer of equitable title.

Can the buyer sell the property in the future without the seller’s consent before they’ve paid off the contract?

This is also negotiable at the time the contract is drafted.

What interest rate should I charge the buyer?

That is negotiated between buyer and seller at the time the contact is drafted and is driven by the prevailing market conditions.  Typical interest rates on real estate contracts are about 1% to 3% more than those on a 30 year mortgage.  Today the average interest rate on contracts at our escrow company is around 8.5%.

Is the Escrow Company regulated?

Yes, all escrow companies are regulated by the New Mexico Regulations and Licensing Department, Financial Institutions Division.

Can I sell my real estate contract in the future if I should have the need for cash?

Yes, you can sell all of your contract or just part of your contract.  The amount you receive depends on how large of a down payment, location of property, interest rate on the contract, if the contract is new or seasoned, payment history, and how many payments remain on the contract.