Creative Financing Is Seller Financing

by | Mar 21, 2011 | Seller Financing | 0 comments


I would like to say a few words about creative financing, also referred to  as seller-financing, or a wrap-around deed of trust deal, or a lease-option deal. 

Creative financing includes seller financing, but it is a broader term. For example, a buyer might get a new first position mortgage with the seller taking back a second position mortgage.  Or the seller might take back security on a different property. Or the seller might take back both a first or second mortgage plus side security on other property. 

Seller-financing is advantageous because it avoids the hassle of having the buyer get a new loan. There are only two parties to a seller-financed deal, buyer and seller, instead of the usual three parties.

The lender is not there to rain on our parade. Two is company and three is a crowd – in love and in real estate transactions.

Are you are a seller having trouble selling your property? I can guarantee you that a big part of the problem is that buyers in general are having a hard time getting financing. So why not eliminate the obstacle? Why not sell on lease-option or wrap-around deed of trust or assumption? Why make the buyer go get a new loan? Let the buyer use your loan.

In the old days almost all residential bank loans could be assumed or “wrapped around.” Then in 1986 Congress passed the Garn St. Germain Act. The due-on-sale clause in paragraph 18 of your deed of trust became enforceable under federal law.

I think one way out of our real estate depression is for the enforceability of due-on-sale clauses to be suspended. Seventy percent of mortgages are owned by Fannie and Freddie, and they could suspend enforcement of Paragraph 18 of the standard deed of trust with the stroke of a pen. I have written to the president about this, to the vice-president, the president of Fannie, the president of Freddie, the secretary of the treasury, the head of the FED. I keep trying.

In a seller-financed deal the buyer makes monthly payments to a collection service. The collection service pays the lender in the seller’s name and keep a record of everything. The buyer will pay a reasonable down payment – enough to pay for closing costs and commissions and maybe enough to cash out the seller’s equity in the property.

If you are a frustrated buyer, especially one having trouble getting financing, look for a seller who will carry the balance. You might find one on your own, and if you do, contact me and I will write up the deal.

You are more likely to find a willing seller if you work through an agent. Tell your agent to look for a seller who will carry the balance. When your agent finds a willing seller, tell your agent to call me.

If you are an agent working on a deal, don’t be shy about calling.I spend a lot of time for free discussing these deals with agents. I love to work with agents. They butter my bread.

By the way, if you would like me to put on a a seller-financing seminar at your office, let me know.

I ask buyer or seller to come in for a consultation. If my client wants to go forward, I ask for for a retainer. I sometimes take part of my fee at closing.

Creative financing, seller-financing, wrap-around mortgages, lease-option deals – they work for residential property, second homes, rental houses, commercial property, building lots – you name it.

When a buyer and a seller find each other and want to buy and sell using creative financing, buyer or seller or agent needs to bring in a real estate lawyer to write up the deal and see that it gets closed properly and safely and to make sure that everyone gets full disclosure. These creative financing deals are complicated and it takes technical expertise to write them up.

That’s where I come in. I write up creative financing deals. I have lost count of how many deals I have written or reviewed since I started practicing in 1978.

Agents normally write up the deal for no extra charge. Agents are authorized to write purchase agreement if standard forms will cover all the issues. But with seller-financing, these agreements are not standard. Each deal is different. A lot of issues have to be addressed.

Agents have earned their commission when they bring buyer and seller to the point where they have reached a basic oral agreement. It is not the agent’s duty to write up a complex deal.

I have closed thousands of escrows over the years, including seller-financed escrows. The title companies won’t touch seller-financed deals. Escrow companies won’t touch them either. They tell the parties to go find an attorney to close them. Sometimes I close them myself. Sometimes I bring in an escrow attorney I know to close them.

I am only licensed to practice in Washington. If your property is in another state, and if you still want to hire me, you would also need to hire co-counsel in your state who will “sponsor” me.

Click here to sign up for my new email list.

P.P.S. I hope you like the Spring theme of this letter. I am really into gardening, especially growing things I can eat. Read more about gardening here.


James Robert Deal, Attorney
James at James Deal dot com
425-771-1110, 888-999-2022

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