When seller financing a property, do you let the buyer add a dwelling (i.e. build a house, add a trailer or camper) or do you not allow any dwelling to be placed on the property until the note is paid in full?
I am looking to seller finance a piece of property for the first time and I am not sure which route to take. It seems not allowing a dwelling will be much cleaner in the event of a default/foreclosure but I think that would also potentially limit the people who would be interested in financing the property in the first place.
@gaent I haven’t ever allowed this (and my contract specifies this), but that doesn’t mean it’s a hard and fast rule for everyone.
I would just say, if you do allow a borrower to alter the property, you’d better be sure they are doing everything by the book, so their “improvements” are actual improvements.
It’s very easy for someone to drag a disgusting mobile home onto your property and abandon it… now it’s your problem. They could also cut all of the beautiful trees down or turn the property into a gravel pit if you don’t get very clear about these limitations.
Again, if they actually do improve your collateral, then it’s not a problem - but there’s a reason why conventional lenders have a lot of mechanisms in place to ensure their collateral is safe. If you aren’t willing to monitor what’s going on, then the easier way to handle this is to simply not allow it.