Eric Scharaga
Founder, Damen Capital
Private lender and direct land note buyer serving land investors nationwide. Featured on REtipster, Legends of Land, and Land Investing Online. LinkedIn →
You have a buyer, agreed terms, and verified credit. Now you close and get paid. This module covers who should prepare the documents, why the title company is not optional, what title insurance you need, and the six provisions that protect you if the loan ever goes bad.
Prefer to read? Everything in the video is written out below. This is module 8 of 14 of our free seller financing course for land.
A title company for simple deals with strong buyers, and a creditor's rights attorney when you want maximum protection, especially on larger loans.
Title companies are convenient, fast, and cheaper, and they handle seller financing regularly. But their documents are built to protect the title company and its policy, not you. An attorney who does private lending and foreclosure drafts for the fight you hope never happens, and can run the foreclosure if it does.
| Title company | Creditor's rights attorney | |
|---|---|---|
| Cost | Lower | Higher |
| Speed | Fast | Slower |
| Documents protect | The title company | You, the lender |
| Handles a foreclosure later | No | Yes, and already knows the file |
Either way, the buyer pays for the documents. Build it into the $500 loan fee or list it as its own closing cost. Never absorb it. If you sell us the note at closing, we provide the documents, which is covered in how our note buying program works.
Because the title company searches title, issues a commitment showing every lien and easement before you close, and records the documents.
Even if an attorney drafted the paperwork, close at a title company. Read the title commitment line by line. If you see an easement, a lien, or a restriction you do not understand, ask the title agent to explain it before closing, not after.
The closing statement, the HUD or settlement statement, proves the buyer actually made the down payment. That document is required when you sell the note, so keep it.
A lender's title policy insures your lien against title defects, the buyer pays for it, and it transfers to whoever owns the note until payoff.
If a title problem ever threatens your lien position, the policy covers it. Because it follows the loan, it makes your note more valuable: when you sell us the note, the insurance comes with it. Require it on every deal.
Vacant land designation, a personal guarantee for entity buyers, a power of sale clause, electronic notice, no prepayment penalty, and no tax escrow with the right to add one.
Whether a title company or an attorney drafts the documents, check for these six. They keep the loan simple for the buyer and protect you where it matters. Ask for them by name.
You buy from the original seller and sell to your financed buyer the same day, and the note buyer purchases the note from you, not from the original seller.
Wholesalers do this. It is more complicated than a cash double close because there are more moving parts. Be clear with the title company: original seller to you, you to the buyer with financing, you to the note buyer. Same day transactional funding is usually needed. Arrange it ahead of time, never day of.
We can provide transactional funding for these deals so you are not using the buyer's down payment to pay the original seller, which creates legal and ethical problems. Details in Module 14.
Transcript of Module 8, lightly edited for readability. The video was recorded before we passed 250 notes; the figures on this page are current.
Welcome to module eight. You found a buyer, negotiated terms that work for both of you, and verified their credit qualifies them for the deal. Now it's time to close and get paid. In this module, I'm going to show you how the closing process works, who should prepare your documents, and what critical provisions need to be included to protect you. Let's talk about who should prepare your loan documents.
You have two options and each has trade-offs. Option one, title companies. Title companies are easier to use and more convenient. They handle seller financing transactions regularly. They know the process. They can get documents prepared quickly. And they're generally less expensive than attorneys. But here's what you need to understand. Title company documents are designed to protect the title company, not you.
Their primary concern is making sure the title work is clean and their title insurance is protected. The loan documents they prepare are often more generic and may not have all the protections you'd want if you end up in litigation with a borrower. Option two, attorneys who specialize in foreclosure, private lending, and creditors' rights. Attorneys are more expensive than title companies, but they're more thorough.
An attorney who specializes in private lending and creditors' rights will draft documents specifically designed to protect you. They understand what provisions matter if you end up in a dispute with a borrower. They know how to structure documents that hold up in court. And here's a huge added bonus. If a borrower defaults, that same attorney can handle the foreclosure for you. They already know your documents. They understand the case.
and they can move forward quickly. So which should you use? That depends on your situation and risk tolerance. Title companies are fine for straightforward deals with strong buyers. But if you want maximum protection, especially on larger loans, use an attorney. Regardless of which option you choose, always charge the buyer for the cost of the loan documents. This should be part of their closing costs not an expense you absorb. Include this in your $500 loan fee or as a separate line item.
Even if you use an attorney to draft your loan documents, you should always close through a title company. Here's why. The title company will conduct a title search to make sure there are no unexpected liens, judgments, or other issues with the property. They'll issue a title commitment that shows you exactly what's on title before you close. Review this title commitment carefully. Look at every item. If you see anything you don't understand, an easement, a lien, a restriction, ask your title agent to explain it. Understand exactly what you're dealing with before you close. The buyer should pay for a lender's title policy. This is title insurance that protects your interest as the lender. If there's a title defect that affects your lien, the title insurance covers it. And here's a key feature.
The lender's title policy is transferable to all future owners of the loan until it's paid off. When you sell the note to me, that title insurance transfers. This makes your note more valuable. The HUD statement, the closing statement, will verify that the buyer made their down payment. This is critical documentation if you sell the note. Now let me cover a couple of provisions you may want to...
in your loan documents. Whether you use a title company or an attorney, you might want to think about making sure these are included. First, specify that this is vacant land. This is important because regulations are different for vacant land versus improved property. Second, if the buyer is using an LLC or company, require a personal guarantee. The individual behind the LLC or company should personally guarantee the loan. This prevents them from walking away from an LLC with no assets. Third, include a power of sale clause. This allows the lender to force the sale of the property and foreclose in case the buyer defaults. Fourth, specify that notices can be sent electronically. If permitted in the state, this allows you to communicate via email rather than certified mail or personal service for everything. Fifth, do not include a prepayment penalty. The buyer can pay off the loan early without penalty. This is a borrower-friendly provision that removes a common objection. Sixth, specify no escrow for taxes. The buyer pays property taxes directly. You'll check online to verify their current.
but include a provision that if the buyer fails to pay taxes, you can add escrow and the buyer will pay the increased servicing fees. These six provisions protect you while keeping the loan structure simple and reasonable.
Let me address double closings briefly because some of you may be wholesalers. Double closings with seller financing are more complicated than regular double closings. There are more moving parts and more potential for confusion. Be very clear with the title company about the structure. They need to understand that you're selling a property to a buyer with seller financing, then immediately selling that note to a note buyer. The note buyer must buy the loan from you not the original seller. The chain has to be clear. Original seller to you, you to the buyer with financing, you to the note buyer. You may need same day transactional funding. Some note buyers, including me, can provide this, but arrange it ahead of time, not day at closing. Double closings require careful coordination.
Make sure everyone understands the structure before the closing. Remember, you can use title companies for convenience, but understand their documents protect them, not you. Attorneys are more expensive, but provide better protection and can handle foreclosures. Always charge the buyer for document costs. Close through a title company with a lender's title policy.
Make sure your documents include the six critical provisions we discussed. In the next module, we'll talk about document management and why you need professional servicing. Let's keep going.
A title company is fine for simple deals. A creditor's rights attorney gives more protection and can handle a foreclosure later. Either way the buyer pays for the documents.
Yes. It protects your lien, the buyer pays for it, and it transfers with the note when you sell it.
Vacant land designation, personal guarantee for entity buyers, power of sale clause, electronic notice, no prepayment penalty, and the right to add tax escrow.
Yes, with same day transactional funding and a title company that understands the chain. We can provide the funding.
Tell us the property, the buyer, and the terms. Written quote in 24 hours, cash at closing, no seasoning.
Private lender and direct land note buyer serving land investors nationwide. Featured on REtipster, Legends of Land, and Land Investing Online. LinkedIn →