What does a buyer need to know if the seller will be holding a mortgage?

Tom Olsen: First in line this Saturday morning is Kevin from Orlando. Kevin, you’re on News 96.5. Go ahead.  

Kevin: Hi. My wife and I are first time home buyers and we’re trying to purchase a mobile home which is almost impossible to get lending for, so we’re going to purchase directly from the owner. He’s going to hold the mortgage. My question is: aside from getting professional legal advice, what important considerations do we need to make sure that our investment is a good one?

Tom: Kevin, first of all, congratulations. You are on the right track here, my friend.

Kevin: Thank you.

Tom: Now, are you buying a mobile home and the land or just the mobile home?

Kevin: The mobile home and the land.

Tom: Okay. Kevin, the way this should go down, and do not cut corners on this, is that there should actually be a closing. On the day of closing, you guys would show up with a title company. On that day of closing, Kevin, the actual land and the title to the mobile home would be changed into you and your wife’s names. You would be the owners. At the moment of the closing, you would give the seller a lean against the land and the mobile homes and all they have is a lean.

If this owner is saying, “Kevin, hey, make payments to me for the next ten years and when you made your final payment, I’ll deed the land and the mobile home to you.” No way, Kevin. On the day of the closing, you are the owners and along with that closing, Kevin, there should be title insurance that will insure to you that you are getting good titles, a piece of property free and clear of all leans and encumbrances.

Kevin, does that kind of sound like the deal you guys have struck, you think?

Kevin: Well, no. To be honest with you, we’ve known the owners about 30 years so it was more of a “in good faith, I’ll make the payments”.  We were doing what sounds like the complete opposite of what you had advised us to do.

Tom: Okay, Kevin, I do not recommend that you do this on a handshake deal and hope that everything goes well when you make your final payment in 10 or 20 years, okay?

Kevin: Okay, thank you very much.

Tom: Kevin, what is your purchase price, by the way?

Kevin: $54,000.

Tom: Kevin, that’s a lot of money. You do need protection. You’re on the wrong track. We just agreed on that, Kevin. If you want to call me, I can help you and give you some more information about that next week. I’m going to give you our phone number, okay? Our office phone number is 407-423-5561.