Frequently Asked Questions About Seller Financing, Part 3

Posted by Ric Thom on 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.