A young couple is just starting the ordeal of buying their first home. They have no experience with this and have no one knowledgeable to advise them. They are told they should choose an experienced, reputable agent to assist them. Question: If your agent is paid a percentage of the price the house sells for, how would it be in their interest to help you make a good deal and not overpay for a property? This is a very silly question I  am sure, and I feel dumb asking it, but it sounds counter intuitive to me.

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A young couple is just starting the ordeal of buying their first home. They have no experience with this and have no one knowledgeable to advise them. They are told they should choose an experienced, reputable agent to assist them. Question: If your agent is paid a percentage of the price the house sells for, how would it be in their interest to help you make a good deal and not overpay for a property? This is a very silly question I  am sure, and I feel dumb asking it, but it sounds counter intuitive to me.

I work in real estate, and I always advise people to try to find a seller who will carry the note. Try to avoid banks at all costs! There are plenty of sellers who would rather receive monthly income than a cash-out payment at sale (to avoid a large capital-gains tax, if nothing else). You also avoid an unscrupulous real estate agent (of which there are many). I would say nine out of ten are honest, but you just might get the one who isn't. One important note: If you do find a seller who's willing to finance you, be absolutely sure to use an escrow company to service the contract. An escrow company is a licensed, neutral third party that works for both buyer and seller equally. It will take in the payments, post the payments, disburse the funds, and hold all original docuмents until the contract is either paid off or defaulted. I should know; I work for one. PM me if you have any questions for me.

Dang!  I actually have real estate questions, and you hate my guts!

A young couple is just starting the ordeal of buying their first home. They have no experience with this and have no one knowledgeable to advise them. They are told they should choose an experienced, reputable agent to assist them. Question: If your agent is paid a percentage of the price the house sells for, how would it be in their interest to help you make a good deal and not overpay for a property? This is a very silly question I  am sure, and I feel dumb asking it, but it sounds counter intuitive to me.

Can you tell us the state where the couple resides?

What percentage do they have for a down payment?

Can you list the questions?



I am in the mortgage business and can offer some assistance.

If I was selling my house, I would never do seller financing.  To me, you would have to be a fool do do such a thing.  First of all, capital gains tax is rarely a problem, because for married people who are selling the house they live in, you have to make $500,000 profit before capital gains tax kicks is ($250,000 profit for a single person).  Second, unless you have your house paid off, you are responsible for paying the mortgage, even though you don't live there, and even if your buyer stops paying.  Third, if the buyer defaults on the loan, you are in the unenviable position of foreclosing, which is a long, costly, and unpleasant process.

Your first point is well taken, but I want to comment on the second and third.

If you still owe a mortgage on your home and decide to sell on contract (which must meet your first mortgagee's approval), you should always pay a month ahead initially to guard against late payments from your new buyer. (Your mortgagee doesn't care if your buyer is late; it only cares that YOU'RE late.) However, if your buyer IS making timely payments, he's paying your mortgage for you - while your mortgagee shows on your credit report that YOU are the one making timely payments. And if your buyer makes those timely payments up to the point where you pay off the mortgage, the proceeds from your buyer's payment go directly to you. Things can go wrong, of course, but you have to ask yourself why you're selling on contract in the first place. It's usually one of two things: a down market (which hurts both buyer and seller) or the desire for monthly income.

The process of terminating the contract (it's not a foreclosure, by definition) is very simple: A notice of default is sent initially for nonpayment, which triggers the default clause (30 days, 60 days, whatever it may be). The buyer then has that amount of time from the date of notice to cure the default (in this example, lack of payment). If not cured by the deadline, the seller can opt to either have his servicer (an escrow agent or other third party, for example) prepare the Affidavit of Uncured Default and Election of Termination, or can prepare it himself if it's party-to-party (an arrangement that's very risky, by the way). That docuмent, along with a deed transferring the property back to the seller, is then filed with the county clerk that has jurisdiction where the property is located. Our local filing fee here is $10, which is hardly costly. As for time, where I live, the defaulted buyer becomes a tenant (just as in a rental situation) upon recording of the Affidavit, which makes him subject to a three-day notice to vacate. The entire process from filing the Affidavit to vacation of the premises can last all of two weeks, hardly a long process. It can be an unpleasant process, of course, but most of my experience - I would say an easy 95% - has involved the defaulted buyer packing up and moving out willingly, with no need for action in magistrate court, mainly because the defaulted buyer will end up paying the seller's court costs if it gets that far - money he'll need for his new home.

If you still owe a mortgage on your home and decide to sell on contract (which must meet your first mortgagee's approval), you should always pay a month ahead initially to guard against late payments from your new buyer. (Your mortgagee doesn't care if your buyer is late; it only cares that YOU'RE late.) However, if your buyer IS making timely payments, he's paying your mortgage for you - while your mortgagee shows on your credit report that YOU are the one making timely payments. And if your buyer makes those timely payments up to the point where you pay off the mortgage, the proceeds from your buyer's payment go directly to you. Things can go wrong, of course, but you have to ask yourself why you're selling on contract in the first place. It's usually one of two things: a down market (which hurts both buyer and seller) or the desire for monthly income.

What you say is true; if (and that's a big "if") the buyer makes normal monthly payment, they will be paying your mortgage on the old house (assuming there is one).  The problem is when the buyer stops paying, and you are suddenly stuck making two house payment per month.  Additionally, if the buyer is paying interest, in most states it is illegal to collect a payment a month ahead.  When interest is involved, the laws of the vast majority of the states say that you can only collect it for days which have actually occurred.  For example, if you make a monthly payment on February 1, you are actually paying for January.

The process of terminating the contract (it's not a foreclosure, by definition) is very simple: A notice of default is sent initially for nonpayment, which triggers the default clause (30 days, 60 days, whatever it may be). The buyer then has that amount of time from the date of notice to cure the default (in this example, lack of payment). If not cured by the deadline, the seller can opt to either have his servicer (an escrow agent or other third party, for example) prepare the Affidavit of Uncured Default and Election of Termination, or can prepare it himself if it's party-to-party (an arrangement that's very risky, by the way). That docuмent, along with a deed transferring the property back to the seller, is then filed with the county clerk that has jurisdiction where the property is located. Our local filing fee here is $10, which is hardly costly. As for time, where I live, the defaulted buyer becomes a tenant (just as in a rental situation) upon recording of the Affidavit, which makes him subject to a three-day notice to vacate. The entire process from filing the Affidavit to vacation of the premises can last all of two weeks, hardly a long process. It can be an unpleasant process, of course, but most of my experience - I would say an easy 95% - has involved the defaulted buyer packing up and moving out willingly, with no need for action in magistrate court, mainly because the defaulted buyer will end up paying the seller's court costs if it gets that far - money he'll need for his new home.

If this is an accurate description of the laws of your state, it is exceedingly seller-friendly and unusual.  In most states, while it is a fairly simple process to record the deed of a buyer in default and confess judgment against them, it is almost never true that the buyer is "converted" to a tenant for legal purposes that the seller can simply evict.  In most states, the seller would have to proceed with an action in ejectment, which is a full-blow civil lawsuit (not an expedited process like eviction), which, if the buyer fights it, can take months or years and be costly.

I guess the lesson is to know the "rules of the game" thoroughly before you decide to do anything.