Option to buy back a defaulted seller financed note

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  • I had an idea. “Option to buy back a defaulted seller financed note”
    Let’s say I acquire a house and seller-finance it to a penalty-box Buyer at 80%-90% LTV. Am I able to create an option in public records (note, memorandum, motgage etc), where if the Buyer misses 3 payments I have the option to deed in lieu the property back to me, and turn them into tenants, (that makes it easier to evict them if they are a nuisance). I am not trying to circumvent the judicial process in my state (Floida), but rather trying to prevent the situation from even GETTING into a judicial process. Is this an approach one of you has used without trouble?

    Jonathan, good question.

    While your intent may not be to circumvent foreclosure laws – Florida is a judicial foreclosure state – the reality is this is exactly what you would be doing.

    In your shoes, if I’m selling and giving owner financing, I give the Warranty Deed – the buyer owns the property. I get a Purchase Money Note and Security Deed (I’m in Georgia, which is a non-judicial foreclosure state). All docs get recorded.

    You may want to consider doing a Land Contract.

    I have a friend in Florida, Jack Shea, that teaches folks to put a property in a land trust and then sell the buyer the beneficial interest in the land trust, not the property itself. This way, if the buyer defaults, because beneficial interest is personal property and not real property, no foreclosure is done.

    I’ve never tried Shea’s method.

    Hope this helps.

    Bill Cook

    Thanks Bill. I have discussed the Jack Shea approach with attorneys in Florida and they are of the opinion that his approach is circumventing the judicial foreclosure if the buyer I sell to is a consumer protected under Dodd Frank/Safe Act. This is the issue. If jack has spoken to an attorney about that I would be grateful to speak with him, his attorney, or both. Its a worthwhile angle to understand

    Jack passed in 2009. Dodd Frank went on the books in 2010.

    Bill Cook

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