I Need Help Creating A Note
while showing my 4th rental property, i was approach by a lady if i would consider selling on owner financing. i started studying and reading about this subject and in texas, i cant do contract for deed if im the seller because of new laws. so im thinking of creating a note but im not sure what documents i need and how to proceed on doing this. i think i like the idea since i do not have to be a landlord while im still getting cash flow, i do not have to worry about problems with the house. can someone tell me how to create a note, and also what has been your possible problem with this type of transaction? such as when the buyer defaults, do i have to go thru foreclosure on the note? i will leave the underlying loan and just wrap it. thanks in advance.
:-?
You are asking questions that shouldn't be answered in a short reply. It is worth it to hire an attorney to make sure you do it right. In my State title companies can also help.
One little mis-step and you can be left without security.
latundan
You can still do a contract for deed in Texas.
Alternatively, you can do a lease option purchase.
I know a few things about contract for deed's and Texas is one of my market states so why do you fill that you can not do a contract for deed?
[addsig]
thanks for your response, john, i think youre right i will just talk to a lawyer to do a note. i just thought someone could give me at a short answer on what type of documents i need.
johnmichael, heres from a lawyers website listing all reasons why you dont do contract for deed in texas.
Contract for Deed
BY: Steven E. Anderson, esq.
William B. Crout, esq.
THE TOP 13 REASONS NOT TO USE A CONTRACT FOR DEED IN TEXAS
A contract for deed is an agreement for the sale of real property from a seller to a buyer which is financed by the seller. The buyer takes possession of the property upon signing the contract for www.deed.The buyer makes payments to the seller in monthly installments under the terms of the contract for deed (usually 10 to 20 years).When the buyer completes the payments then the seller conveys the property to the buyer by a warranty deed.A contract for deed is often used by developers to sell housing to lower income families in lieu of the more traditional seller financing documents (Warranty Deed with Vendors Lien, Note and Deed of Trust).
Effective on September 1, 1995, the Texas Legislature imposed additional requirements for using a contract for deed covering residential property in certain counties in www.Texas.Counties located within 200 miles of an international border (Mexico) and with a per capita income that averaged 25% below the state average for three years are subject to the additional www.requirements.The new law imposes the following requirements for a contract for deed covering residential property in these counties, including El Paso County, and thereby discourages their use by developers or other sellers.
1) WRITTEN NOTICE.Before a contract for deed is signed by the buyer, the seller must provide the buyer with a written notice that contains certain information about the property such as water service, sewer service, electric service, property taxes, liens and current ownership.
2) SURVEY.Before a contract for deed is signed by the buyer, the seller must provide the buyer with a recent survey of the property.
3) COPIES OF DOCUMENTS.Before a contract for deed is signed by the buyer, the seller must provide the buyer with copies of any document that describes an encumbrance or other claim, including a restrictive covenant or easement, that affects title to the property.
4) SPANISH www.LANGUAGE.If the negotiations that precede the execution of a contract for deed are conducted primarily in Spanish, the seller must provide a copy in Spanish of all written documents relating to the transaction.
5) SELLER?S DISCLOSURE OF FINANCING TERMS.Before a contract for deed is signed by the buyer, the seller must provide the buyer with a written statement that specifies:
a) the purchase price of the property
b) the interest rate charged under the contract
c) the dollar amount, or an estimate of the dollar amount if the interest rate is variable, of the interest charged for the term of the contract
d) the total amount of principal and interest to be paid under the contract
e) the late charge, if any, that may be assessed under the contract and
f) no prepayment penalty may be charged.
6) LATE PAYMENT PENALTY.A seller may not impose a late payment penalty in a contract for deed of more than 8% of the monthly payment or the actual administrative cost of processing the late payment whichever is less.
7) BUYERS RIGHT TO PLEDGE INTEREST.A seller may not prohibit the buyer from pledging their interest under the contract for deed as security to obtain a loan to place improvements on the property.
8)NO PREPAYMENT PENALTY. A seller may not impose a prepayment penalty if the buyer elects to pay the entire amount due under the contract for deed.
9) BUYERS RIGHT TO CANCEL WITHOUT CAUSE.A buyer may cancel a contract for deed for any reason within 14 days after the date of the contract for www.deed.If the contract for deed is canceled by the buyer, the seller must return all payments made by the buyer within 10 days.
10) RECORDING.A seller must record the contract for deed in the deed records of the county where the property is www.located.If the contract for deed is terminated, then the seller must record the document terminating the contract for deed.
11) ANNUAL ACCOUNTING www.STATEMENT.The seller must provide an annual statement to the buyer in January of each year for the term of the contract for www.deed.The annual statement must contain the following information: a) the amount paid under the contract b) the remaining amount owed under the contract c) the number of payments remaining under the contract and d) the amounts paid to taxing authorities on the buyers behalf if collected by the seller.
12) EQUITY www.PROTECTION.If a buyer has paid more than 40% of the amount due under the contract for deed or made 48 monthly payments, then the seller may only terminate the contract for deed by foreclosing on the contract for deed in a similar manner as a beneficiary under a deed of trust.However, the seller must give the buyer 60 days notice to cure the default instead of the 20 days notice to cure default required to foreclose under a deed of trust.
13) TITLE www.TRANSFER.The seller must convey title to the buyer within 30 days after the final payment due under the contract is www.made.If the seller does not comply, then the seller is subject to a penalty of $250 per day for each day after the 30th day and $500 for each day after the 90th day after the final payment due under the contract is made.
These requirements are designed to protect the buyers under a contract for deed and have made it very burdensome for developers or other sellers to use a contract for deed in sellingresidential property.