Do I have to own a home free and clear to offer seller financing?

[Dakota Ochoa]

Do I have to own a home free and clear to offer seller financing to a buyer? Not sure how seller financing works completely. Thanks for the help in advance!

[Don Konipol]

1. Buyer assumes existing note ‘subject to’ and seller carries second lien

2. Seller offers seller financing and ‘wraps’ the new note ‘around’ the existing note

3. Seller pays off the existing note and sells with owner financing a new first lien

4. Seller offers a long term lease with option to buy

5. Seller sells on a ‘land contract or contract for deed’.  This is a sale in which there is no recording of the transfer of warranty deed, i.e. the seller retains legal title while the buyer gets equitable title.  At some point, determined by negotiation between the parties and applicable state law, legal title by transfer of warranty deed is concluded.

6. Seller forms a legal entity, such as a personal trust, transfers property by warranty deed to the trust, which depending on Federal or state law may not trigger the due on sale clause.  Seller than names buyer as either protector of the trust, administrator of the trust, and or a beneficiary. 

Please note that all of the above except number 3 may not be legally defensible against the mortgagee or trustee accelerating the mortgage due to violation of due on sale clause.  However I myself and numerous investors have successfully utilized these methods of sale in the past.