Help with Seller Financing

[Brett C.]

Hey BP.  My question is where and how do you SET UP seller financing?  If you have a handshake and are aligned with a seller on the amortization, rate etc.... THEN WHAT??!!

What company do I go to to set up the lone and make it legal?  

How does it work?  Both the seller and I want to have everything managed correctly and fairly, if I default I should lose the property, I should be able to make auto payments like any other bank and the title should transfer to me when I pay it off. 

I should be able to refi CLEANLY just like any other bank.  

How do I do this?  What companies do I go to?  How do you execute getting the loan in place?

[Jeff Stephens]

Brett, the most standard way to do this (and the method I use very frequently), is with two primary documents:  1) Promissory Note and 2) Deed of Trust

The Promissory Note is where all the terms of the loan are outlined:  the interest rate, the loan amount, how payments are made, the amortization, the maturity date, what the collateral is, etc.  You are the Maker of that note, and your Seller is the Beneficiary.

The Deed of Trust is the instrument that will be recorded with your County on the title of the property.  It will show that your Seller (now the Beneficiary) has a claim on your property as collateral for the loan they've made you.  

I live in a state with title companies, so all of this is put together by the escrow officer (though I actually draft my own Promissory Notes).  In other states, it would be a closing attorney who does this.  If you give the escrow officer or closing attorney an outline of the terms you and the seller have agreed to, they can create the documents for you.  

With this structure, at closing you will become the owner of the property, and the seller will have a deed of trust.  As @Seth Ferguson mentioned, it's the same structure as most mainstream retail real estate transactions:  the bank loans you the money to buy the property, you become the owner, and the bank has a deed of trust.  

Good luck! Feel free to DM me if you want to chat further.