I am going to assume that by this question you mean to hold a note and mortgage and not sell the property pursuant to a Contract for Warranty Deed - which is another way of selling your property and continuing to be paid on it. If you hold the mortgage on the property, you will need to trust that the person(s) that you are lending to will be able to pay the mortgage over the life of the loan - whatever period that is. If they do not, you will need to foreclose, which can take up to a year to complete - a year in which you are not receiving payments, for which you may be responsible for insurance and real estate taxes. If you do decide this is a risk you are willing to take, make sure you have the Note and Mortgage documented by an attorney who knows how to document these kinds of loans and is not just doing you a favor. If they are not documented properly, the mortgage can be thrown out and you only have the right to sue on the Note.
This is a bad idea, unless you have no other choice. If the buyer can not get traditional financing he is not a good credit risk, so why would you want to take on such a risk?
In this financial environment, you want to minimize risk. Get your money from the house, and then invest it wisely and conservatively.
Hope this helps.
Mr. Fromm is licensed to practice law in PA with offices in Philadelphia. He can be reached at 215-735-2336. He is featured as a 5Star Wealth Manager in the current issue of Philadelphia Magazine, November 2009 on page 123.
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