In some Missouri home sale transactions, the Buyer is unable obtain a loan from a bank or other conventional lender. In those cases, it may make sense for the Seller to finance all or part of the purchase if the Seller owns the property free and clear of all liens/loans. This is often referred to Seller take-back financing.
When the deal is structured this way, a number of documents are needed. Among them are 1) Promissory Note, and 2) Deed of Trust
The Promissory Note is the document that shows a debt exists between the Buyer and the Seller for a certain amount of money and on certain terms.
The Deed of Trust, referred to as a “security instrument,” is the document that secures the property for the benefit of the Trustee (an agent of the lender). Deeds of Trust are recorded with the appropriate county Recorder of Deeds and create a lien against the property, and are used to foreclose on the property if the borrower fails to pay.
Since every deal is slightly different, some deals may also require additional documentation, such as an asset purchase agreement (if Buyer is keeping any personal property of Seller), or a security agreement (if there is certain equipment or home-based business items that are part of the sale).
Note that if there is a primary lender (a bank or other conventional lender), and the Seller is only financing part of the deal, the Buyer must also obtain the primary lender’s consent to the Seller’s loan.
If you have questions regarding your situation, or need to document Seller financing, please contact us at (314) 862.2237 or at mjacob@marcjacobesq.com
