DO YOU NEED AN ESCROW SERVICE COMPANY WHEN BUYING OR SELLING USING OWNER FINANCING?
Escrow Service Companies, do you need one when owner financing using a Bond for Deed?
An escrow service can be used to process the monthly payments of an owner financing contract.
- The escrow service gives the purchaser a level of comfort in knowing their payment is going to be sent to the mortgage company each month.
- The escrow service gives the seller/owner a level of comfort in knowing the payments are being monitored and action will be taken if payments are late.
The escrow company is a neutral "funds manager" in the Bond for Deed transaction. The purchaser sends their monthly payment to the escrow service. They, in turn, disburse the payment as instructed in the Bond for Deed contract. There are fees for the services they offer that are usually charged to the purchaser who is owner financing. Some of the fees include a set up fee, a monthly transaction fee, a close out fee, and, of course, there is a fee if they send out late payment/45 day letters.
They monitor the payment history, send out late notices, and monthly statements to the seller.
When choosing or being referred to a particular escrow service company, do your research. Ask for a list of their fees for all of the services they offer. Take the time to confirm the escrow service is licensed and bonded. If someone won’t sit down and talk with you, call someone else. When owner financing, you do have choices.
Using an Escrow Company for payments can be waived by the parties to the transaction. When you make the decision to purchase or sell using owner financing, carefully review your contract. It should include details of where you make your payments and what the fees are for the servicing of your payments. Whether or not you choose to use an escrow service company, be sure to do your homework.
Feel free to give us a call or email if you have any questions about owner financing.
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