If you watch any TV at all, you have seen the ads. They are omnipresent.
P90x, Insanity, 10 Minute Trainer, Hip Hop Abs, Total Gym, Nutri Bullet, Tai Chi Made Easy, Eat and Lose, Zumba, Muscle Confusion, Brazil Butt Lift. Etc., etc., etc.
I work out a lot. I have bought P90x and borrowed routines from the others. These firms spend millions trying to show us ways to get healthier and stay physically fit. Like anything else, if a person commits to a program the results will follow. Unfortunately, as we walk around every day and observe our fellow Americans, quite a few folks are not getting the message.
I talk to a lot of people every year who have sold a property by using a seller carryback note. Industry statistics for the past year or so indicate that about 90% of these transactions were done by sellers who were doing their first and probably last seller carryback. Many of these folks preferred to have their buyer get a bank loan so the seller could cash out and not be tied to the property. But tight lending standards forced the seller’s hand. In order to sell his property, he had to take back the note.
Once the parties have agreed to terms, now what? Here is the similarity to physical fitness. If you are overweight or out of shape and haven’t seen the inside of a gym in years, it’s not too late. All you have to do is recognize your situation, commit to change, focus on the program you have selected, and DO IT! Simple.
So, if this is the first seller carryback you have done, there are some simple steps you can take to maintain your note’s fiscal fitness. You can’t change your buyer or the terms you agreed to, but you can do your part to maintain the integrity of your transaction.
Here are a few simple steps:
1. In your file, have all the phone numbers of your buyer/buyers. Have email addresses as well. You must be able to contact your buyer immediately whenever the situation demands it.
2. Make sure you have the parcel number – APN – of the property you sold. When property taxes are due, go online or call your county assessor office and confirm they have been paid. Just because you are getting your monthly payment does not guarantee that the taxes are being paid. Verify.
3. Send your buyer, at least annually, an updated amortization schedule showing the current balance due. If you are using a 3rd party servicing company, they will provide this to you. You want to be sure you and your buyer always agree on how much has been paid and what is owed.
4. If your buyer pays late 2 months in a row or exceeds the grace period, call him immediately. You want to know what is going on before the situation deteriorates.
5. If your note has a balloon payment, notify your buyer in writing about 6 months before the due date to remind him. This should give him time to arrange for the necessary financing to pay you off or have a different conversation with you if he won’t be able to come up with the cash.
6. Make sure you are listed as the payee on the insurance policy and that you receive renewal notices. In event of a claim, you want to be paid the insurance proceeds first. And, if the renewal is not paid by your buyer, you can protect yourself, pay the premium, then work with your buyer to get back on track.
7. Keep a log of all your conversations with your buyer, with the date and time. Don’t depend on your memory or his to recount what you guys said or agreed to.
8. If you live in the area, drive by the property occasionally. If you live in another town or out of state, have a friend or relative do it for you. Part of your buyer’s contractual obligation is to maintain the property value. This is his responsibility and it directly affects the quality of your note.
This is a short list. I have a 30 page Note Owner’s Manual that includes these items and more to help a seller stay on track. If you would like a free copy, email me at dennystanz@verizon.net and I will get it to you.
