Owner Carrying 2nd Mortgage. Pros & Cons, How to Get Started?

5 Comment(s)

1. A title company can prepare the note for you based on the terms you spell out. A Real Estate attorney would be the better choice to handle the entire transaction.

   Owner held 2nd mortgages are generally from 8% – 12%, depending on the borrower and the note you will carry.

   Closing costs on a second mortage are generally small, the buyer usually pays to file the note etc. You, as the seller, usually pay for the title search and owner’s title policy.

   I would call a trusted RE attorney and find out how much they aould charge to draft the sales contract and 2nd owner held mortgage. Also, what happens if the 2nd mortgage is not satidfied in 2 years etc. Be sure to spell out what happens if the balloon payment is missed.

   Hope this helps, good luck

   valstpatrick | Mar 16, 2009 | Reply

2. I agree with the previous post. She obviously is very experienced. Give your attorney the problem. Go about your business and don’t worry about it. I’m not sure, though, if I would be quick to get myself tied into a 2nd mortgage unless you have your equity well covered in the first mortgage. I think that is probably true for you?

   Curious about flat fee brokers and agents?

   greffy | Mar 16, 2009 | Reply

3. PLEASE: If you don’t know what you are doing or how to do it – to protect yourself – PLEASE, PLEASE, PLEASE get professional advice and assistance – from a competent, knowledgeable real estate attorney or from a real estate broker.

   Real estate is not the kind of investment you want to “cut your teeth on” the very first time out of the box. ESPECIALLY when you are in 2nd position OR MAYBE in a 3rd position.

   Like the old saying goes:
   “So, you thought — and think — education is expensive? Just wait until you try ignorance.”

   Thank you for asking your question. I enjoyed taking the time to answer your question. You did a great job – not only for your information, but for every other person interested in reading my answer.

   I wish you well!

   VTY,
   Ron Berue
   Yes, that is my real last name.

   Ron B | Mar 17, 2009 | Reply

4. Why are you going to carry a second? If your buyer defaults on either or both of the payments you may not be able to recover your money or your property through the foreclosure process because you are in “second” position. You need to talk to a reputable real estate attorney before you do this — if you don’t know one, your State Bar Association should be able to give you a referral. It may cost you a couple of hundred bucks, but it will be money well spent.

   Here’s an example of what can go wrong — I work for a real estate attorney and it’s based on three of our recent cases:

   You have an offer to sell your home for $100,000.00. Your buyer does not have enough money to make the down payment he needs to make to qualify for a loan so you agree to carry a second for the amount of the down payment (i.e., 20% = $20,000.00) — at the time, it seems like a good deal because you will be getting 10% interest on your second. As a result, your buyer will sign two trust deeds and two promissory notes; one each for $80,000.00, which will be the first, and another for $20,000.00, which is your second. The trust deeds will then go to your County Recorder to be recorded in the land records — the first will be recorded first and the second will be recorded second; and, the rule is “first in time, first in line” — six little words that have a lot of meaning.

   Your buyer then defaults on the payments and can’t get caught up so the property goes into foreclosure (foreclosure is a legal process — it’s complicated and expensive).

   Your $20,000.00 second is “subordinate” to the first — that means that the holder of the first has superior rights (he’s “first in line”); and, he has no responsibility to look our for your secondary interests. In all of the cases we handled, the holders of the seconds had to pay-off the firsts and all of the costs associated with those foreclosures to be able to get control of the property. Then they had to pay for their own foreclosure actions. Fortunately, they all had enough cash to do that, if they hadn’t, their seconds would have been wiped out by the foreclosures on the firsts.

   I wish you luck selling your home, but you need to know what you are doing and understand the risks you will be taking.

   Nancy G | Mar 19, 2009 | Reply

5. Check out this site, I’m sure they have the answer you’re looking for.

   Diane F | Mar 23, 2009 | Reply

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