We inherited a slumlord-style property from my FIL. The current tenant has been doing renovations for a year now, paying low rent, and we don’t care what he does to the house since it’s in poor condition. He’s invested a lot of money into it, and we want to sell it to him through seller financing because it won’t qualify for a mortgage.
I have a couple of questions:
What are the drawbacks of seller financing if we don’t care what happens to the house?
Who is responsible for liability claims if something happens at the property while we have it seller financed? We currently carry no insurance due to the property’s condition, and I’m wondering if an umbrella policy is needed once we sign contracts.
Probably low risk, but make sure the tenant maintains insurance. I’d only want an umbrella policy if there were serious concerns, like environmental contamination. It might be worth hiring an attorney to draft the contract to protect yourself.
Talk to a local real estate lawyer. They can write a contract for you and ensure the deed transfer includes a lien, just like a bank would. Make sure they carry homeowners insurance to cover potential damages.
Hire an attorney to handle the seller financing. This keeps you at a distance from potential issues. If they default, the attorney can manage the foreclosure process.
We are closing with a real estate attorney, but communication has been slow. I’m more concerned about liability than getting paid. Does anyone have experience with this?