Seller Financing - promissory note

[Nikki Perry]

Good morning,

I am new to seller financing.  I have a house in Fort Worth, TX that I am selling.  I received an offer from a investor.  I had the house on the market through the company I had managing the investment property for $379k.  I have a loan balance for $126k.  Here's the buyer's offer:

Buyer - buy the house for $400k

Buyer - had down payment for $140k (35%) - this will pay off my mortgage, closing costs and seller realtor commission

Seller - receive $5000 at closing

Seller Finance Terms: - $260,000 – Monthly payments of $930.76 per month with a 5-year
balloon Due on November 6th , 2028.
Buyer paying off mortgage in order to seller finance $260,000 with seller

Buyer gets the title at closing

As the seller, I don't see a promissory note for the financed amount and I don't feel comfortable.  The buyer could default and in the contract it just says that down payment is what I get as the seller.  So that means the buyer has the title, possibly not paid the $260k that they are supposed to finance and I lose the house and $260k equity I had in the house.  

How can I protect myself as the seller?  I have other rental investment properties, but this is the first time I am dealing with a seller financed option.

Any advice is helpful!  Thanks!

[Jay Hinrichs]

what you dont say is how much the interest rate is.. 

on the surface you just record the 260,000 mortgage or deed of trust and hold the prom note that happens through escrow no problem there.. but I suspect they are offering you well under market interest.  

AS for safety this is a pretty safe deal as long as your a first mortgage.. they dont pay you get the house back so unless they destroy it or strip it you should be fine. 

I would just make sure your interest rate is market 7 to 8% on owner carry at least. 

lastly you will want to check with your CPA to determine your tax at the time of sale if you lived there last two years you have zero tax. If its an investment property you will have cap gain that will have to be figured into the entire picture