Recording a mortgage on seller finance deal.
Lawrenceville, GA · Member since 2021 · 24 posts · 5 votes
Recording a mortgage on seller finance deal.
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Quote from @Nate Bartlett:
@Wayne Brooks I don't know either. Honestly, I'm so over using this attorney. She is my attorney and owns the title company and she has a terrible attitude, but I'm too far in the process to switch to someone else.
This is my first off market deal, so I'm just making sure I don't screw it up. Are these forms I can find on Bigger Pockets? (I have a pro account). Or can a title company supply them? I searched online and could only find a promissory note template, but I couldn't figure out how to get it to show that the mortgage was amortized over 30 years, but there's a balloon payment in 36 months.
Possible language
FOR VALUE RECEIVED, I, [Borrower name] (hereinafter known as “Borrower”), promise to pay to the order of [Lender name, address] (hereinafter known as “Lender”) the sum of [X and 00/100 Dollars] ($[]), with interest from the date hereof until paid at the rate of [X percent ([]%)] per annum on the unpaid balance. Said principal and interest is payable as follows: Commencing on [date], and continuing on the [1st] day of each and every month thereafter [principal and interest payments of [$]], with the entire remaining unpaid balance of principal and interest, if not sooner paid, being due and payable in full on or before [maturity date].
Add same maturity date to mortgage.
Monthly payment amount reflects the applicable amortization schedule. Good luck.
Gimer Law517 Reviews
13 Replies
- Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes3y
@Nate Bartlett I don’t understand what conflict there is. Anyway, you need a standard mtg document, in addition to the Promissory Note, then go to the courthouse and record the mtg document after it is signed and notarized.
- Lawrenceville, GA · Member since 2021 · 24 posts · 5 votes3y
@Wayne Brooks I don't know either. Honestly, I'm so over using this attorney. She is my attorney and owns the title company and she has a terrible attitude, but I'm too far in the process to switch to someone else.
This is my first off market deal, so I'm just making sure I don't screw it up. Are these forms I can find on Bigger Pockets? (I have a pro account). Or can a title company supply them? I searched online and could only find a promissory note template, but I couldn't figure out how to get it to show that the mortgage was amortized over 30 years, but there's a balloon payment in 36 months. - 3yJeff CopelandBusiness MemberReal Estate Broker · Tampa Bay/St Petersburg, FL · Member since 2015 · 1k+ posts · 2k+ votes
@Nate Bartlett - Any real estate attorney licensed in your state can do this for you.
I was going to say any title company will have an attorney who can handle this for you as part of the transaction, but I see your attorney is affiliated with the title co.
The conflict lies in the fact that she is "your attorney", but she'd be preparing mortgage documents that should be designed to protect the seller; she can't (or won't) represent both parties.
It is not something I would DIY.
Copeland Morgan LLC4.867 Reviews - Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes3y
@Nate Bartlett
FYI if it’s owner occupied typically a balloon need to be atleast five years
This is not a conflict
You can also go to a title company
7e investments53 Reviews - Lawrenceville, GA · Member since 2021 · 24 posts · 5 votes3y
@Chris Seveney Thank you. It's not owner occupied, but it does come with a tenant in place.
- Lawrenceville, GA · Member since 2021 · 24 posts · 5 votes3y
Quote from @Jeff Copeland:
@Nate Bartlett - Any real estate attorney licensed in your state can do this for you.
I was going to say any title company will have an attorney who can handle this for you as part of the transaction, but I see your attorney is affiliated with the title co.
The conflict lies in the fact that she is "your attorney", but she'd be preparing mortgage documents that should be designed to protect the seller; she can't (or won't) represent both parties.
It is not something I would DIY.
@Jeff Copeland Thanks. Any ballpark on what an attorney might charge for something like this? I might also reach out to a title company that I used to work for many years back to see if they can do it.
- 3yJeff CopelandBusiness MemberReal Estate Broker · Tampa Bay/St Petersburg, FL · Member since 2015 · 1k+ posts · 2k+ votesAnywhere from $500 to $2500, depending on the complexity.
Quote from @Nate Bartlett:
Quote from @Jeff Copeland:
@Nate Bartlett - Any real estate attorney licensed in your state can do this for you.
I was going to say any title company will have an attorney who can handle this for you as part of the transaction, but I see your attorney is affiliated with the title co.
The conflict lies in the fact that she is "your attorney", but she'd be preparing mortgage documents that should be designed to protect the seller; she can't (or won't) represent both parties.
It is not something I would DIY.
@Jeff Copeland Thanks. Any ballpark on what an attorney might charge for something like this? I might also reach out to a title company that I used to work for many years back to see if they can do it.
Copeland Morgan LLC4.867 Reviews Quote from @Nate Bartlett:
@Wayne Brooks I don't know either. Honestly, I'm so over using this attorney. She is my attorney and owns the title company and she has a terrible attitude, but I'm too far in the process to switch to someone else.
This is my first off market deal, so I'm just making sure I don't screw it up. Are these forms I can find on Bigger Pockets? (I have a pro account). Or can a title company supply them? I searched online and could only find a promissory note template, but I couldn't figure out how to get it to show that the mortgage was amortized over 30 years, but there's a balloon payment in 36 months.Possible language
FOR VALUE RECEIVED, I, [Borrower name] (hereinafter known as “Borrower”), promise to pay to the order of [Lender name, address] (hereinafter known as “Lender”) the sum of [X and 00/100 Dollars] ($[]), with interest from the date hereof until paid at the rate of [X percent ([]%)] per annum on the unpaid balance. Said principal and interest is payable as follows: Commencing on [date], and continuing on the [1st] day of each and every month thereafter [principal and interest payments of [$]], with the entire remaining unpaid balance of principal and interest, if not sooner paid, being due and payable in full on or before [maturity date].
Add same maturity date to mortgage.
Monthly payment amount reflects the applicable amortization schedule. Good luck.
Gimer Law517 Reviews- Real Estate Agent · Sacramento, CA · Member since 2022 · 36 posts · 6 votes3y
You need a new transaction co-ordinator and attorney more familiar with creative finance . Let's connect, i can refer you to a good one!
- Lender · Washington DC · Member since 2015 · 2k+ posts · 2k+ votes3y
Seller does need their own representation. There are "free" promissory note templates online but I would not print and sign that.
My opinion is you would be "safer" handwriting the terms and conditions, rate and exact balloon due. Simplify your terms.
Sales price $54000 loan amount $44000 I would avoid the extra payment in 6 months as you or he have to agree to re-amortize or not-- and make annual calculations --and file 1099C . He needs a CPA to figure the numbers. How many months is the payment amortized??? In three years you owe about $41000 You need an attached amortization schedule and all the IL state and federal forms.
What is your exit strategy? You cannot count on refinancing the $41000 as you have road blocks: Loan to value low for an investment loan, loan small, many lenders don't do small loans as they get hit with High Cost rules. You have to plan on selling. Conventional loans are not going to be easier in three years. Your rate of 3% is far far cheaper than market and LTV low so cash flowing with a refinance probably won't fly.
Maybe get a NMLS IL lender to give you the other disclosure forms you need.
- Lawrenceville, GA · Member since 2021 · 24 posts · 5 votes3y
Quote from @Tom Gimer:
Quote from @Nate Bartlett:
@Wayne Brooks I don't know either. Honestly, I'm so over using this attorney. She is my attorney and owns the title company and she has a terrible attitude, but I'm too far in the process to switch to someone else.
This is my first off market deal, so I'm just making sure I don't screw it up. Are these forms I can find on Bigger Pockets? (I have a pro account). Or can a title company supply them? I searched online and could only find a promissory note template, but I couldn't figure out how to get it to show that the mortgage was amortized over 30 years, but there's a balloon payment in 36 months.Possible language
FOR VALUE RECEIVED, I, [Borrower name] (hereinafter known as “Borrower”), promise to pay to the order of [Lender name, address] (hereinafter known as “Lender”) the sum of [X and 00/100 Dollars] ($[]), with interest from the date hereof until paid at the rate of [X percent ([]%)] per annum on the unpaid balance. Said principal and interest is payable as follows: Commencing on [date], and continuing on the [1st] day of each and every month thereafter [principal and interest payments of [$]], with the entire remaining unpaid balance of principal and interest, if not sooner paid, being due and payable in full on or before [maturity date].
Add same maturity date to mortgage.
Monthly payment amount reflects the applicable amortization schedule. Good luck.
Thanks for this!
- Lawrenceville, GA · Member since 2021 · 24 posts · 5 votes3y
Quote from @Caroline Gerardo:
What state?
Seller does need their own representation. There are "free" promissory note templates online but I would not print and sign that.
My opinion is you would be "safer" handwriting the terms and conditions, rate and exact balloon due. Simplify your terms.
Sales price $54000 loan amount $44000 I would avoid the extra payment in 6 months as you or he have to agree to re-amortize or not-- and make annual calculations --and file 1099C . He needs a CPA to figure the numbers. How many months is the payment amortized??? In three years you owe about $41000 You need an attached amortization schedule and all the state and federal forms.
What is your exit strategy? You cannot count on refinancing the $41000 as you have road blocks: Loan to value low for an investment loan, loan small, many lenders don't do small loans as they get hit with High Cost rules. You have to plan on selling. Conventional loans are not going to be easier in three years. Your rate of 3% is far far cheaper than market and LTV low so cash flowing with a refinance probably won't fly.
All very good points. Noted.
Edit: state is Illinois
As far as exit strategy, I'm fairly confident in being able to refi. I'm purchasing far under the current value. I also plan to add value by upgrading kitchens and bathrooms, paint, etc.. ARV is conservatively $125k.
It does have a tenant in place and she’s far under market rent. She’s aware than rent will increase by $200 in 30 days from $850 to $1050. I’m going to do a one year lease with her at that new rate. Once her lease is up and the home is vacant, I’ll do the upgrades. This will raise rents from the current $850 to $1800. Cash flow will not be a problem.
Please let me know if you see any holes in my strategy. I’m here to learn.
- Lender · Washington DC · Member since 2015 · 2k+ posts · 2k+ votes3y
Do you have comparable sales blocks away for $125000? What if market declines?
If it appraised for $125000 SIX MONTHS FROM NOW or some LENDERS in 12 months you could borrow $87000 more or less. Payment in the $855 PITI range. So market rents of $1800 can DSCR if those programs still exist in three years. Or if you have a W-2 job that covers your "nut" (housing and all vehicle/student loans/credit cards) you have reserves and good credit. No idea what interest rates will be in 3 years.
I NEVER NEVER like to take an existing tenant it's the kiss of death, there's that issue.
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