Landed Your First Seller Financing Contract!? Now What? - YouTube

People ask me all the time about seller financing and we talk about seller financing all the

time on my channel because it's one of my favorite ways to buy properties and we buy

recently a lot of multi families from small multi families from small mom and pops, and

they seller finance.

So a lot of people come to my channel to learn about seller financing and Jackson Jackson

sent me a really great question about the seller financing process and like what the

heck do you do once you get the seller to agree to your seller financing terms?

My name is April Crossley Welcome to my YouTube channel.

I'm a real estate investor in Berks County, Pennsylvania, we flip houses here by small

multifamily properties.

And we also do a little bit of private lending.

And today, we're going to talk about how what the seller financing process looks like.

Okay, so Jackson sent me a question asked, once you're done your due diligence, so your

due diligence is like you walk the property, you know what repairs it needs, you know,

this is the property I want.

And you talk to the seller about financing it and you finally get them to agree, which

sometimes it's a really long process.

The last two seller financing deals that I got from small mom and pop landlords took

me six months to hash out exactly what the seller financing terms would look like.

Because it took me that long to educate the seller, but it's worth it because there's

some of the best deals that you're gonna get are going to be seller financing ones from

small mom and pop landlords, so hang in there and have some patience, you need to be able

to explain to them what the seller financing process looks like.

Because they want to know that you know what you're doing because it makes them feel comfortable.

If you're talking to them.

And they're like, Okay, once I agree to this, then what happens and you're like, Oh, but

I don't know, they're not going to feel real comfortable about seller financing they're

building for you, because they're becoming the mortgage company.

The mortgage company wants to lend to someone they feel comfortable with.

Okay, so these are the steps, this is what the process looks like, after you're done

due diligence, after the property is under contract, so just like a flip, you agree on

seller financing terms, you're gonna send the contract to the seller, they're gonna

sign it with the seller financing terms, and they're gonna send the contract back to you.

And then this is what you're gonna do.

Okay, so this is how I do it in Pennsylvania, every state is going to be a little bit different

depending on what your closing process looks like, you're going to send the contract to

the title company, I always tell my sellers, even though you're becoming the mortgage company

and your seller financing, the property is closed with a title company or a closing attorney

sellers sometimes think what happens is, say they agree to let's use the eight unit we

were talking about in a previous video.

The seller thinks if I'm seller financing $108,000 For you, I'm giving you $108,000.

If you were a seller, would you feel comfortable just giving someone a check for $108,000?

No, you wouldn't.

And that's not how the process works at all.

So you need to let the seller know everything happens with the title company or closing

attorney, any funds that you give them that you put down any money down.

And any contracts are notarized via a title company or an attorney.

So I tell them, it's all done on the up and up, just like if you were to normally buy

or sell a house, okay, so send your contract to the title company, then you need to contact

an attorney to draw up a note and a mortgage.

And we talked about notes and mortgages in previous videos.

So make sure you subscribe to the channel.

So you can go back and watch all that stuff.

I know lays out the terms.

It's like me as the buyer, I'm making payments of 650 a month to Mr. Seller at 6%.

For 30 years with a balloon in five years, the payment is going to be on the 20th of

every month and I'm going to send it to this address or this bank account via wire that's

all laid out in the note.

That's what the note says it lays out all the terms.

So it's basically our agreement with the seller.

The mortgage is what gets recorded at the courthouse so that when they sell or finance

for me, I can't sell the building out from underneath them without paying them off, meaning

they're holding a loan of 108,000.

For me, I'm making payments to them every month, but I can't sell that building to someone

else without paying off their loan.

Okay.

They're going to ask you that, trust me that question comes up all the time.

So the mortgage is recorded.

The mortgage is the lien on the property, it's a lien on the property, contact an attorney.

Whatever you do, it might cost you like 300 bucks

or 500 bucks to have the note mortgage drawn up.

Don't print off paperwork from like some random website or like get paperwork from Staples.

Have a professional attorney do it, I will usually draw it up via my attorney and then

tell the seller they can have their attorney check it if they want their attorney to check

it.

Okay?

Things you need to give the attorney, you need to tell them the sellers name and the

sellers address, the property address and the tax ID number.

That's what specifically identifies the property for the attorney and the note mortgage, the

buyer, meaning you your name, or your LLC name, and the address.

This is all information the attorney is going to need for the mortgage, how much the seller

is mortgaging, what the interest rate is and what your monthly payments are going to be

what the date of closing is going to be closing happens with the title company or with an

attorney depending on what state you're in.

Okay, so they need all this for the note mortgage.

So now that you've watched this video, when you email an attorney, you can have all this

information laid out for them, it's going to make their life so much easier and drop

the note mortgage so much faster, then you're going to present this note mortgage to your

seller, and they can have it checked by their attorney, all this gets signed and notarized

at settlement.

Okay, so once the seller says, note mortgage looks great, you're going to take that mortgage

and you're going to send it to the title company so that they have it, they'll hold it until

closing and then you can find it at closing, your seller doesn't even actually, they'll

go to closing but you sign a lot more paperwork than they do on a seller finance.

So the other thing you need to do is reassure your private money lender that their main

is going to be put on two insurance policies.

One is the property insurance as what's called a loss pay.

So say they sell or finance a building and the building burns down well, they have a

mortgage on the building to you, you want to make sure that they get paid if the building

burns down by the insurance company.

So the seller on a seller finance is means as a loss payee on the shirt insurance policy.

They're also they also get what's called a lender title policy.

So quick explanation for those that don't know, title insurance is like say you own

a building.

And a contractor puts on a roof for you and you don't pay the contractor.

So they put a lien on the building saying you owe me $30,000, okay, when you go to sell

that building, the title company does a title search and that lien of $30,000 will show

up.

So in order for me when I buy the building that will have to be paid off, they're ensuring

that the title is clear, and there's no liens on it.

You want your lender named on the title policies, or to have what's called a lender title policy,

so that if anything wonky shows up down the line, you know that they're insured, the title

company did a title search, they made sure all liens were clear.

And if the title company missed anything, you don't have to pay for it, your lender

doesn't have to pay for it.

Your title company is the one that has to pay for it because they missed it in the title

search, okay, so they get named as a lost key in the property insurance.

And they get named as they get their own lender or title policy on the property.

So the title company, when you go to settlement, you set a date, you go there, and they will

notarize the note and they file the mortgage at the courthouse, usually the local courthouse,

I've actually had title companies tell me to file it in like different states.

And that's kind of weird, like I just go back and tell them I don't do that.

So whatever I need to pay you to file it, please file it.

So just get clear on that with your title company or attorney but I always make sure

that they're filing the mortgage and they handle the deed transfers.

When a seller finance I get this question all the time, the deed transfers, the seller

is going to ask you that they are not responsible for taxes anymore.

The property is not in their name.

It's now in your name as the buyer they are strictly acting as mortgage company.

So the deed transfers.

I don't like deals where the deed doesn't transfer I've had sellers ask me, I don't

know if I want the deed to transfer until you pay me off then I'm like no, the deed

has to transfer I want the deed in my name.

They're protected as a loss paid or protected on the lender title policy.

And in the note mortgage side note in case they asked,

I always have my attorney put in the note something called assignment of rents.

So if I stopped making mortgage payments to the lender, my rent go can automatically go

to the lender lender can take my rents from the building if I stop making mortgage payments

Okay, so there's things the attorney can put in the note to protect the lender but I always

want the deed transfer okay.

So your heart very last thing you do one of course celebrate because you got to deal on

seller finance, which is amazing, too.

To set up payments, I always have my bookkeeper set up my lenders payments.

So say the lenders payment lender slash seller who's financing their payments are due on

the 20th of every month.

I have my bookkeeper set it up, I told him payments are due on the 10th I always want

my payments to arrive early.

When a seller's financing you don't want them to be like wondering where where's the payment,

what's going on checking their mailbox feverishly.

You want it to arrive early, you want them to be comfortable with you.

So set up some kind of automatic payment whether that's a check going up from your bank account,

or transfer to transfer from bank account to bank account, whatever the case may be,

but send it early, and then send all your paperwork to your accountant.

The accountant needs to know everything if you don't have a professional accountant and

you're buying real estate you need to get one the days of h&r block and like doing your

own accounting is over that ended.

Okay?

So all this paperwork, your know your mortgage, the payments you're sending to the lender,

all that information needs to go to your accountant so he can hash out everything at the end of

the year because you're paying interest to this private money lender.

So there's certain forms your accountant has to send them at the end of the year.

Okay.

So that's everything you need to do when a seller finances property so that you can explain

it to them and watch this video over and over and explain it to them and they'll feel totally

comfortable with you.

Thank you guys for watching.

You can find out more information by following us in our free group on Facebook coffee target

real estate investing.

You can also follow us on Instagram at April Crossley and you can email me any of your

questions [email protected] Thank you

Transcribed by https://otter.ai