How do I handle an offer that uses Seller Financing?

Posted by Ric Thom on August 24th, 2010

I often hear the following comment, or something like it, from fellow REALTORS® throughout the state: “I know how to prepare a purchase agreement on a property that requires conventional, FHA or VA financing, but I’m not sure how to properly handle an offer that uses seller financing; nor do I know the sequence of events after the offer is accepted”. Let me try to address this in 300 words or less.

Most, if not all, RANM Purchase Agreements have a section that pertains to financing. Seller financing is included in this section. Fill out the purchase agreement just as you normally would and check seller financing. Now you need to fill out and attach RANM Form 2402 (Addendum to Purchase Agreement-Real Estate Contract). This is a”mini me” of a Real Estate Contract (REC). The title company and their attorney need this information to correctly prepare the REC and deeds.

Some REALTORS® choose not to use RANM Form 2402, but instead try to cover the terms of the transaction on a blank Addendum Form. This practice leads to a lengthier closing period and leaves the REALTOR® vulnerable to a future law suit. RANM provides these forms for a purpose. Please use them. After the purchase agreement has been signed and accepted, take it to the title company. The title company will then order a title binder. Once that is completed, they will send it with your purchase agreement and the addendum to the attorney who prepares the REC and deeds. The attorney then sends the documents back to the title company. Now, you close. Buyer and seller sign the REC and deeds. The REC is recorded and sent to the escrow company along with the unrecorded deeds. The escrow company now “sets up” the account. They send out a welcome letter, general information, and an amortization schedule to both parties. The buyer will be sent payment coupons. Once the buyer has paid off the REC, the escrow company will send the buyer the warranty deed that it has been holding. Like anything else, it’s pretty easy once you know it.