How does this work legally? I'm trying to find more financing options, and this sounds safe. The only thing I'm worried about is if the seller decides to default on their 1st mortgage.
2007-08-05 19:49:24 · 3 answers · asked by PlasticTrees 2 in Business & Finance ➔ Renting & Real Estate
There would be an attorney involved. I'm not entirely stupid.
2007-08-05 20:19:20 · update #1
We've been doing real estate/land contracts for over 30 years and if done properly, you really don't have to worry about the seller taking the money you send for payment on the first mortgage and going to the casino instead.
The key to guaranteeing you that the mortgage will be paid by the seller when you make your payment to the seller is in the escrow company instructions.
You must have the seller agree within the contract that when you make the payment the amount received by the escrow company will be disbursed first to pay the underlying debt of the mortgage that the seller owes with the balance payable to the seller. At the end of the year the escrow company (third uninterested party licensed to be an escrow company) will send you a 1099 showing how much interest you have paid on your debt to the seller.
Default of the mortgage would now fall on you if your payment is not made and not on the seller who is relying on you to make their first mortgage payment.
Best of luck to you
2007-08-06 01:46:27 · answer #1 · answered by newmexicorealestateforms 6 · 0⤊ 0⤋
If you are considering engaging in purchasing via land contract and the seller owes on a mortgage, your contract should include a stipulation that you pay via two checks monthly. One made payable directly to the seller, and the other made payable to the seller AND his mortgage firm, in the exact amount of the monthly payment. Paying your obligation in this fashion will eliminate any concerns on your part, since the seller will be able to do nothing more than endorse the dual payment check, and forward it to the mortgage lender.
Assuming you will pick up liability for property taxes and insurance, you need do nothing similar in that regard, since you will be paying for these items directly.
Also insure that you have a legal 'mortgage' agreement with this seller, so that you are entitled to use any interest paid as YOUR tax deduction, not his. (The lender will continue to send Form 1098 to HIM, stating how much interest has been paid)
2007-08-06 00:09:24 · answer #2 · answered by acermill 7 · 0⤊ 0⤋
Get an Attorney! Don'r even think of doing this without your own ATTORNEY!
2007-08-05 19:54:19 · answer #3 · answered by Anonymous · 0⤊ 0⤋