I know in “Red Flags Of A Real Estate Installment Sale” I said I would be back to do part 2 a couple of days ago, but I ended up so busy, and low and behold, the guy paid me. I guess he decided I wasn’t playing the game. It’s amazing what the voice of a lawyer will do! LOL. My lawyer is the best! I’ll ad his name and phone number to the “resources list” if anyone needs him.

Another form of a Real Estate Installment Sale is buying a home on a Land Contract or Wrap-Around Mortgage. This is where the owner has a mortgage, but sells you the home and he holds your mortgage. He is essentially the bank for you. Many things can go wrong here.

Red Flag #1- There is a “Due on Sale Clause” in the seller’s mortgage stating any kind of transfer of any part of the property, and the bank has the right to declare the full amount of the original mortgage on the property due in full. This leaves the buyer in a position that at any time the original bank may ask for the full amount, and if you can’t refinance to pay them, they can foreclose on buyer and the seller.

Red Flag #2- The seller or the buyer wants to hold the contract “unrecorded”. Here again, this is done in hopes of the bank not finding out what’s going on, implementing the Due on Sale Clause, and leaves the buyer unprotected. It’s also considered to be fraudulent.

Under any situation where the seller is going to act as a bank by carrying back a mortgage on the home, it is extremely important to get a credit report on the buyer, make sure there are no liens against the seller or buyer that could attach to the property, and make sure all paper work is done correctly so that every one involved is protected.

In this market where people are having a hard time selling their homes, it is not uncommon for the seller to carry some type of financing. If you are thinking about using any form of selling or buying in installments, feel free to ask your questions or leave a comment below. I would be happy to help.