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LEGAL TIP OF THE WEEK: Owner Financing May Benefit Both Buyers & Sellers


by Marine View Law & Escrow

DID YOU KNOW…

That you can provide seller-financing on a real estate transaction?

At Marine View Law and Escrow, we have helped a number of clients provide seller-financing for properties that they wish to sell but either cannot find borrowers with sufficient credit to borrow from traditional lenders, or wish to earn the potential interest on the financed amount. “Seller-financing” means the seller acts as lender to the purchaser and is entitled to the interest collected on the financed amount. Many owners of second homes or rental properties elect this option when they are tired of managing the rental property, or want to generate income from a second home. Other clients have used this option when they wish to sell to a family member and want greater control of the repayment terms.

There are two common methods of establishing a seller-financed real estate transaction, both of which our office has experience. The first is a Real Estate Contract (“REC”) where the seller retains title to the property and the purchaser is given possession and makes payments according to the terms of the contract. Title to the property passes once all obligations under the contract have been satisfied, usually when the final contract payment is received. This option affords the seller the benefit of forfeiting the contract in the event of the purchaser’s default: essentially the seller is entitled to retain the contract payments made up to the date of default, and recover possession from the defaulting purchaser. .

The second common method of establishing a seller-financed real estate transaction is the Deed of Trust and Promissory Note. Under this method, the purchaser is entitled to possession of the property and the seller conveys title to a trustee who holds the title for the benefit of the seller and will convey it to the purchaser upon satisfaction of the Promissory Note. The Promissory Note establishes the payment terms of the transaction, including the interest rate, late fees, and the contract term. In the event of default the trustee often sells the property for the benefit of the original seller (by that point deemed the “beneficiary”).

Regardless of which method you choose, Marine View Law and Escrow can draft the documents you need, counsel you on the best terms to include to protect your interest, and assist you in closing the transaction. Now is a great time to start earning interest on that second home or rental property so contact our office today!

Please contact our office at (206) 878-8777, or visit www.marineviewlaw.com if you believe you or someone you know may be in need of assistance with a real estate transaction.

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