What forms and procedures are needed for seller-financed mortgage agreements?

Full question:

Seller offered to sale house to me, with 'him caring the mortgage', as appose to Land Contract. What forms and procedures are needed for this?

• Category: Real Property
• Subcategory: Sales
• Date: 04/07/2025
• State: Ohio

Answer:

One common method of seller financing is a contract for deed, also known as a land contract. In this arrangement, the buyer does not receive the actual deed until they have made all payments as outlined in the contract. Until the deed is transferred, ownership remains with the seller, and the property can be foreclosed upon if the buyer defaults on the mortgage.

If there is an existing mortgage on the property, using a contract for deed may violate a due-on-sale clause. This clause allows the lender to demand full payment of the mortgage if the property is sold or transferred without their consent. If the property is foreclosed, the buyer may lose any investment payments made and the home itself.

A promissory note can be secured or unsecured. If secured, the lender can take the property (collateral) if the buyer fails to make payments. In case of bankruptcy, the lender may recover the loan's value by taking possession of the collateral rather than receiving only a portion of the borrower's assets.

Promissory notes can specify payment terms, such as installments or a lump sum, and may include provisions for a balloon payment at the end of the loan period. Some agreements may also include a confessed judgment clause, which requires the debtor to waive defenses and accept a judgment if they fail to pay.

There are various ways to structure real estate transactions, and the best approach depends on specific circumstances, including whether there are mortgages or liens on the property and who will be named on the deed. For tailored advice, consider consulting a local attorney who can review the details and documents involved.