Vendor takeback mortgages?

I'm selling a property and I'm willing to do a vendor takeback.


The questions I have are:


1. What kind of interest rate do vendor takebacks normally charge? I'm guessing about 2% or so above the market rate?


2. Who do I need to involve? Is it just the same real estate lawyer / notary that would be doing the sale transaction?


3. Is it safe to do this, what do I have to watch out for?





Thanks!!Vendor takeback mortgages?
To do a seller take back is risky since the buyer who needs one won't have enough money coming in to get financed for the full amount of the necessary loan. I believe you are right in line with what interest rate to charge and the easiest way to reduce risk is to keep the take back mortgage amount small and/or to keep the term short. The buyers mortgage broker and closing attorney can be your greatest aid in writing the mortgage. Make sure the buyer incurs all of the closing costs for the take back mortgage and the closing attorney records the mortgage. I have had two buyer clients that bought houses with take back mortgages and both refinanced within 2 years paying off the take back's well before the mortgage term ended (which were 5-7 years originally).Vendor takeback mortgages?
You might also want to be creative. Get an appraisal on the home and push them for maximum value. If it is above what you are selling the home for, increase your sales price so that the buyer is maximizing his loan amount.





Example:


Original sales price: $80,000


Max loan amount @ 80% = $64,000


Value: $95,000


80% of this is $76,000- almost your original sales price


You would then write a new purchase contract for $95,000 and record the lien you hold still, but be willing to release it once the $4000 is paid.





Obviously this depends greatly on the value of your home vs. the agreed upon sales price.
%26gt;%26gt;%26gt;%26gt;%26gt;%26gt;%26gt;%26gt;%26gt;%26gt;%26gt;%26gt;%26gt;%26gt;%26gt;%26gt;%26gt;%26gt;%26gt;


Is it safe to do this, what do I have to watch out for?


%26lt;%26lt;%26lt;%26lt;%26lt;%26lt;%26lt;%26lt;%26lt;%26lt;%26lt;%26lt;%26lt;%26lt;%26lt;%26lt;





The more down payment you get, the safer your mortgage will be. In fact if you get a large down payment, hope the buyers default so you can foreclose and sell the property again.