Structure of escrow account with seller finance?

[Jon Klaus]

What are the caveats and how do you structure escrow accounts for property tax and insurance?

I'm selling a home that I own free and clear. I'm creating a new 30 year note, contract for deed. My buyer is finding their own property insurance, and my LLC will be named as additionally insured. I'll pay the tax annually. How should I set this up?

[Marc Faulkner]

Most folks that seller finance transactions, do not escrow for taxes and insurance. As long as you are listed as loss payee and additional insured on the insurance and record your contract listing the new buyer as the owner with the county, both the insurance company and the county will keep you posted as to what is going on. Your note should also require that they show you proof that both taxes and insurance are paid as due. On top of the legal reasons mentioned above escrow accounts are also just extra work to maintain.