How do you craft a good seller-financed loan?

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A few years ago I bought a property outright and put it in joint tenancy with my then-boyfriend, now ex-husband. Although we both want to keep the property, he has the upper hand in the negotiations because he is living there rent-free (against my wishes) and the courts are so backlogged due to the pandemic, that it will be two years before we get a hearing.

His ultimatum is that I sell him the property and finance the loan or I wait two more years, with no rental income, no access to the cash I paid for the property and spend upwards of a hundred thousand dollars in attorney fees. (Yea, it's really that much for the lawyers.)

He is offering to pay me $490,000 for the property on the following terms:

zero down payment

4% interest.

He would make payments to me at $2600 per month, with $1633.33 initially being interest.

The remaining principal would be due in three years.

In a seller-financed loan, what are the typical terms? 4% seems like a low interest rate when there is no down payment.

Are there any special rules in California regarding seller-financed loans?

What can I do to make sure there aren’t any loopholes he can use to get out of paying me? How do I make sure that I can foreclose on him and get the property back if he misses payments or doesn’t make payments in full? There is a long history of him taking advantage of me financially and of not following through on promises. I do not trust him.

Any advice would be much appreciated.

Thank you.

[Chris Crosby]

Hi Rebecca, I am sorry to hear about your recent misfortune with your ex-husband.  I have seen seller financing anywhere between 10% - 50% down.  I would recommend requiring an escrow company to make payments and also draw up a note.  Happy to make a recommendation if you need a referral.