How Do I Sell a Mobile Home with Owner Financing?
The answer will depend on all the facts involved, such as whether you also own the land it is on and whether there is a lien on it by a finance company or other. If the land is included, you may consider a contract for deed. If the sale of the home is separate from the land, you may consider a sales contract, accompanied by a promissory note.
One of the most common methods of seller financing is a contract for deed, or land contract, which is often used as an alternative means of financing the purchase price of property. The buyer does not receive an actual deed until payments are made under the terms of the contract for deed agreement. Until the buyer receives a deed, ownership isn't transferred and the property is subject to being foreclosed on if the mortgagee/owner defaults on the mortgage. The responsibility for payment for the property is a separate issue from the ownership of the property. A contract for deed allows the seller and purchaser to elect specific requirements concerning purchase price, interest, and payment terms. Also, fees related to insurance and taxes can be set in the direction of seller or the purchaser at their option before the signing of the agreement.
If there is a mortgage on the property, the contract may violate a due-on-sale clause in the mortgage which the lender may or may not seek to enforce. Most lenders require that the mortgage or deed of trust contain a due on sale clause. This is an acceleration clause in a loan, calling for payment of the entire principal balance in full, triggered by the transfer or sale of a property. Such a clause permits a secured mortgage lender (federal, state or private) to call the entire unpaid loan balance due and payable immediately if the property securing the loan is sold, transferred, traded, gifted or otherwise disposed of without the lender’s prior written consent.
A promissory note may provide for payments to be made in installments or in a lump sum. The terms may provide for a series of smaller payments at the beginning of the loan period and a larger balloon payment at the end of the loan period. The option for a confessed judgment agreement, also called a cognovit note, may also be included. A confessed judgment agreement requires the debtor not to claim defenses and agree to have a judgment entered against him if he fails to pay and the matter is taken to court.
Please see the following information regarding promissory notes:
Promissory Note: A promissory note is a written promise to pay a debt and is typically signed at the time of the loan. It is an unconditional promise to pay on demand or at a fixed or determined future time a particular sum of money to or to the order of a specified person or to the bearer.
Cognovit Note: A cognovit note is a note in which the maker acknowledges the debt and authorizes the entry of judgment against him or her without notice or a hearing : a note containing a confession of judgment. This type of note is not valid in many States.
Collateral Note: A collateral note is a note secured by collateral. Same as a secured note.
Demand Note: A demand note is a note payable on demand from the person who is owed the money.
Floating Note: A floating rate note (or adjustable rate note) is a note where interest varies.
Recourse Note: A recourse note is a note where the default may result in loss of collateral and also personal suit and judgment. Most notes are recourse notes.
Renewal Note: A renewal note is a note that renews a previous note due date.
Unsecured Note: An unsecured note is a note that is not secured by any collateral but only the promise to pay (i.e. signature only is required to loan the money).