A Guideline for Owner-will-carry Real Estate Transactions -bijoux perles eau douce

A Guideline for Owner-will-carry Real Estate Transactions By: Urbain Beck

Chances are, if you are purchasing partially-improved or unimproved real estate, it may be difficult to get a mortgagor unless the owner will carry the loan. In certain situations, you can also find owner-financed real estate that has been developed – or in legal jargon, improved.

While this commentary is not intended to be legal advice, there are a number of general tips you should consider when acquiring an ‘owner will carry’ style of mortgage.

THE TITLE PAPERS.

Before executing any sort of mortgage, check out the title to the property. This means you should get a title insurance commitment and evaluate it carefully to make sure that there are no liens on the property or easements running across the acreage that you are considering buying. You should also examine the survey and compare it with the metes and bounds description provided in the title commitment. These ought to match.
If you live in an dry state in the West that has administrative procedures in place for water rights, ask the seller to provide you copies of all appropriate water right filings.

The title commitment will show all recorded papers that affect the land. There could be restrictive covenants or other restrictions in place. Obtain copies of these and examine them. Most county recorder’s offices in the States have online document services nowadays, so you should be able to print the papers out. If not, ask the seller to provide them.

Ask the seller to state in writing whether there are restrictions or agreements in place that have not been recorded but that could affect the acreage you are about to purchase.

THE DOWNPAYMENT AND OTHER PRE-PURCHASE CONSIDERATIONS.

Before purchasing unimproved land, determine if there is electrical service or if you will need to install alternative power or pay thousands of dollars to bring a power line in. Check on the availability of water, gas, telephone service and other critical services. See who will maintain the roads. Find out if you have to haul your refuse to a landfill and if so, how far away the facility is located. If you have kids, find out if school bussing is on hand. Ask the owner for information about whether the property is in a floodplain.

If you are buying undeveloped land, you should walk the entire boundary of the property and check for the survey stakes. Spot check for evidence of makeshift roads – it is likely that someone has been driving across unimproved property for years and thinks there is an access easement.

As to the owner financing, you will need to find out what the downpayment, term and interest rate will be. Ask if there is a prepayment penalty. In some cases, you might be able to get other financing that has a lower interest rate. There are a few lenders that specialize in unimproved property loans. Check their rates against the owner’s rate and get the best contract you can.

THE Mortgage DOCUMENTS.

In an owner will carry situation, the loan is typically handled by an escrow service. Loan documents will include a promissory note, a deed of trust (mortgage), a deed (if possible, get a warranty deed instead of a quitclaim deed), and, depending on the state, an affidavit of property value. Depending on the nature of the property, you might need to sign other agreements, such as water sharing agreements, restrictive covenants and so forth.

Regardless of who prepares the documents, make sure that you comprehend all of the title restrictions and loan conditions. In the case of escrow companies or an owner using document preparation software, sometimes the papers are drafted quickly and may contain errors. For your own protection, read and understand everything so that there are no unanticipated surprises down the road. It is sensible to talk to a legal professional before signing anything.

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