Where do I get a payoff?

Question

I'm using private money for the first time and will be selling one of my projects within the coming weeks. The title company is asking for a payoff letter from the private lender. I do not think my lender is able to prepare such a document but I could do it for them and have them sign off.

So...I guess my question is: what is required in a payoff document? Is there a standard document available to use? I can't be the first person to run into this problem haha

So...I guess my question is: what is required in a payoff document?  Is there a standard document available to use?  I can't be the first person to run into this problem haha

Andrew Malik · Answer

Thanks @Hattie D. !

Hattie Dizmond · Answer

Every day we learn something is a great day!  I have great days every day, because there's soooo much I don't know!!!

Congrats on getting your deal done.

Hattie

Andrew Malik · Answer

Wow!  Thank you everyone, I'm always so impressed with not only the amount of responses but the quality of responses received on the forum.

I ended up working with the title company to get a payoff put together and it was exactly what @Hattie D. , @Jon Holdman and @Wayne Brooks said it would be.  I prepared the payoff to be set for an extra day beyond closing (just in case) and had my lender sign off on the payoff to approve the amount.  There was also a discharge that the title company prepared for my private lender.

It was also an interesting situation because the lender had passed away during the project and the daughter became the executrix.  Since all money in the father's name needed to be accounted for, we had the mortgage assigned to the father's estate prior to the paying off the mortgage (actually happened at the closing table).  The payoff check was made out to the estate and controlled by the daughter, it was really only a technicality but I definitely learned something new!

Thanks again everyone!

Nick Wing · Answer

@Jon Holdman @Hattie D. said it exactly correct. The loan servicer usually provides the payoff statement (aka payoff demand), or lender, or escrow(i guess out of CA, a title laywer/closing agent) with the final numbers. Here in California, they also prepare a Deed Of Reconveyance which will be recorded at the county of the property showing that the lien has been satisfied.

Wayne Brooks · Answer

As Hattie said, it will be a specific dollar amount, as of a certain date, and a per diem rate of interest after that; ie $84,358.23  as of 08/01/14 plus $21.34/day thereafter.  Also, you will need someone (title co. or attorney) to prepare the satisfaction of mortgage to be signed by the lender, and recorded after the closing.

Jon Holdman · Answer

The lender has to prepare it.  Its simply a statement of how much money they want in order to consider the loan paid off.  They typically say "as of x/x/2014 the payoff amount is $xxx" and then it includes a daily rate around that date so the payoff amount can be adjusted based on the exact closing date.  The title company uses that information for the check they will write to the lender and to create the HUD-1 statements.  It also includes information about where to mail the check or where to wire the money.

Philip Cutting · Answer

@Hattie D. is right on.  If the private lender is not using a payment processing company and they are not experienced you may have to draw up the document yourself.  If this is the case, ask the title company to help you prepare the document and ask the lender to review it and sign off on it.  It can be quick, but it can also talk a while if you don't have good contact with the private lender.

On the form, put in a daily interest expense incase the closing take longer than you anticipate so that you don't have to redo the form.

Good luck @Andrew Malik !

Talk soon,

Phil

Hattie Dizmond · Answer

I'm guessing your lender is on the Title as lienholder, which is why the Title Company is asking.  In that case, all they are looking for is a formal statement of what funds are due to your lender at closing, in order to release their interest and clear the title for transfer.  Typically, that statement would consist of the full amount and a date that amount is good through.  (i.e.  Loans have interest applied by term.  As the lender I'm telling you $5000 will fully pay off the obligation and release my interest in this property through 8/1, which is when I would recalculate the interest.  It's just a payoff amount.)  A release of lien would be filed to formally remove the lien from the property.