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Creative Financing

Creative financing: You’ve heard of it, and, as a seller, the idea sounds pretty attractive. But, do you know everything you need to know about carrying back a second; essentially, about becoming a lender? You better know the same things that financial institutions know - you better know about lender’s title insurance.

It’s time to sell your $150,000 home, a home that you have owned for fifteen years, a home in which you have substantial equity. The loan terms call for a $20,000 down payment from your buyer, a new $100,000 loan from a local savings and loan, and for you, the seller, to carry back a note for the remaining $30,000.

Will you, the seller, need title insurance?

Yes, you will. Everyone who retains an interest in the property needs title insurance. When you took on the role of lender, you retained a record title interest which you will want to protect for the term of the loan.

But, why would you need lender’s title insurance when the repayment of your loan is assured by a lien in the form of a recorded deed of trust against the property? What could possibly go wrong?

You must insure yourself for the same reason that financial institutions obtain title insurance - for the protection of your investment. You must be assured that your lien on the property cannot be defeated by a prior lien or other interest in the property, which, if exercised, would wipe out your security.

Anything that involves the new buyer’s ownership rights to the property is of direct interest to you because you are holding the second mortgage. If such ownership rights are in question or defective, you may have trouble collecting your monthly mortgage payments. But, you say, there is nothing in your property’s history that could cause problems: no problems with easements, no problems with boundaries, no problems with rights-of-way.

Contrary to what may be popular belief, these matters are not the only source of title problems; a large proportion of title problems arise out of man’s interaction with man. The fact of a marriage, a divorce, a death, a forgery, a judgment for money damages, a failure to pay state or federal taxes - these occurrences can and usually will affect your rights as a mortgage lender.

As an example of what can befall the lender, did you know that a federal tax lien recorded against your buyer before the loan transaction is concluded may result in the loss of security in your home? Sophisticated mortgage lenders are aware of this possibility as well as many others which could jeopardize their loan security and seek the protection afforded by a lender’s title insurance policy.

If you are considering carrying back a second, be sure to get all the facts regarding the benefits of lender’s title insurance. Your local title insurance company should be happy to provide the information you need.

Article by CLTA

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Testimonials

Harold it was a pleasure having you as my agent. You were always professional competent knowledgeable and a saint having to work with selling agent. I would highly recommend you to any of my friends and family. I especially noted how quick you were to respond to all my request and communications. I love my new home and looking forward to you stopping by to see the changes I made. Thanks again! Rosemarie Miller
Diane was Amazing. She walked me through the selling process, step by step. She was very knowledgable about the area, pulled comps often, and made sure to keep me informed about my competition throughout the entire process. She is very hands on and always available when needed. She even did a little manual labor getting the house ready to list. She did her homework well and sold my house in 4 day, above asking!! As a new agent, if she didn't know the answer, she always found out quickly and responded timely. Michele, Pinehurst NC
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Towering Pines Real Estate

229 W. Pennsylvania Avenue
Southern Pines, North Carolina 28387
910-246-GOLF (4653)
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Allan Nanney, Broker in Charge
229 West Pennsylvania Avenue - Southern Pines, NC 28387
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