Hometown Happenings

Navigating the Seas of Owner Financing & Escrow: A Realty Voyage with Charity

• Angela Ballard & Aundrea Rogers

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Unlock the mysteries of owner financing in real estate with the insightful Charity from Meridian Title Company as we dissect the nuances and advantages of Integrity Escrow Services LLC. Prepare to arm yourself with knowledge that could transform your property investment strategies, as we delve into how escrow safeguards transactions, and the intricate dance of payments and legal notices. Our chat promises a wealth of information for those steering away from traditional banking routes, and for sellers eyeing the benefits of staggered capital gains.

Grab your financial compass and navigate through the treacherous waters of informal agreements and murky record-keeping. We share real-world cautionary tales that underline the indispensability of escrow companies in smoothing out potential ripples in owner-financed deals. Understanding the technicalities of loan interest accrual emerges as a beacon of light in this complex conversation, spotlighting the expertise of real estate agents and escrow professionals alike. And for a sweetener, Charity's ready to dispense financing wisdom (and peanut M&Ms) to all who seek it.

For more info:
Integrity Escrow Services LLC
https://integrityescrowar.com/

The Home Team
Angela Ballard & Drea Rogers
870-577-6754 | 870-577-0276
Weichert Market Edge

https://aundrea-rogers.weichertmarketedge.com
www.angelaballardrealtor.com

Speaker 1:

So this week we are again with Charity from Merdian Title Company because she's gonna tell us about a company that she has that she runs called Integrity escrow services. So yeah, I'll see, here it is. She's got it right here For those of you watching. You can see it here on our fancy notebook and so we're gonna talk a little bit today about owner financing and things that she offers through that service, and maybe people just are curious what owner financing is and how it can be a benefit to them, or why do we?

Speaker 2:

care, as real estate agents, about owner financing, because why do I need you? I can just do it myself. Okay, so how do you guys have anything to do with owner financing? Are you asking me?

Speaker 3:

I'm asking you legit so well, you might have a buyer or a seller that doesn't want to get a bank loan. Or the seller says so you don't wanna sell this, but they don't wanna get capital gains on the full sale of the property. So what do we do? So they say I'm willing to owner finance. And then you have a buyer that's willing to owner finance with the seller, and then you call me. And what do you do? And then I do.

Speaker 3:

I like they sort out you know what they agree to as far as the loan and the terms, and then, if they don't know what the payment's gonna be, I can tell them what a payment's gonna be for that interest rate and that timeframe, and it could be a two year. You know, when we say in two years, then we're gonna be in a different spot as far as the seller goes, and the buyer has then made all these payments and worked their job for two years and now they can get a loan. So you might have a buyer that can't get a conventional loan, but you know, instead of paying rent they're actually paying towards their ownership of their house.

Speaker 1:

So recently, charity and I, this all didn't come together but we were in the process of negotiating in owner finance situation where my client would had a large sum of cash for purchase for example 200,000, but the house they were under contract for 250. So they were gonna put 200 down and then owner finance. The seller was willing to owner finance that 50,000 to them.

Speaker 2:

So who does? Okay, so does your buyer then pay the seller in like a monthly check? Do they autograph?

Speaker 1:

Yeah. So what would happen is, mike, we'd go to closing and you would determine who you're going to use for the escrow portion of your owner finance, which is where charity comes in.

Speaker 3:

So there's only a couple companies in town and two of the other title companies do have it, but I think one doesn't. They don't do a lot of it. Well, they don't want it anymore. They have customers but they don't accept new ones, and the other one you have to close there and there's different fees, and so there's not any like independent. So that's why I started my company, because there was a need for it and there were any options for people that were already in it. There was a company that went out of business and it kind of left some people high and dry and they were getting pretty desperate.

Speaker 2:

So you just handle the in between, then yes, so if you're the buyer and you're the seller.

Speaker 3:

You deposit money into my LLC escrow account and then I collect a small fee and then give her her money.

Speaker 2:

So if you don't want direct contact with or if I'm worried, hey, you're going to say I didn't pay you last month.

Speaker 3:

Yeah, so also my job is to give notice. So if you don't pay after 10 days, I send you a notice. If you don't pay after 15, 20, 30. Yeah, so you get automatic notices from my like website that says your payment is doing five days. Click on this link. Pay with the ACH or mail in a check to the PO box, however you want to pay. There's different options, but the ACH option is nice for the buyers.

Speaker 2:

You just need to see what I'm saying.

Speaker 1:

Yes, Like she has an app that they can try to track you down to pay Right.

Speaker 3:

And I don't have to track you down to pay.

Speaker 1:

Yeah, to get my money and she provides me my money and, as the person receiving all this, she can provide proof that you've paid my tax statements. All of those things.

Speaker 3:

So it's January and I just issued all the 1099s for the sellers because I'm paying them funds for my LLC, and the 1098s for the buyers because you pay interest on your loan and it's tax deductible for you. I think so so I do reporting, irs reporting for both sides, so that sounds worth it. This right there, it helps. It does cost money to do that.

Speaker 1:

Part of those fees are for that. Do you mind to talk about what the fees are?

Speaker 3:

Well, the fees are. It depends on the loan. The bigger the loan, the bigger the stuff. Well, yeah, it could be anywhere from 15 to $25 a month. So the monthly fee Right. Yes, yeah, and the setup fee is 150 to like for you to give me the information, me to put everybody in the computer, build the loan and then set up.

Speaker 2:

Oh, Karen, I was thinking you're going to me, I take 25% of whatever. Yeah, I know I was a black fee.

Speaker 1:

The way you were talking, I was thinking you're eluding. Like this is really expensive.

Speaker 2:

Yeah, I know, it's not really that expensive, it's very minimal Grand scheme of it all and it should be fairly seamless for everyone involved.

Speaker 3:

But that is the problem. It's great if the two buyer the buyer and seller, you know are paying each other, but the problem comes when someone is not fulfilling their contract.

Speaker 2:

Yeah.

Speaker 3:

So they both sign a contract for deed at the beginning which gets recorded and it notifies the tax office that there is a contract for deed on this property. And if you know, if you don't carry insurance and you're not paying your taxes, you know that goes back on the seller.

Speaker 1:

they could lose the property that they have a mortgage on or have a you know owner money, so do you verify the tax, carry insurance, you make them provide copies, that's where I like the.

Speaker 3:

If their contract for deed says that the buyer is to provide insurance, then they have to provide it to me and then I provide it to the seller. So it depends on how they write things up, which is important to know what you need to put in your contract, because some of them are super vague and they just say payments. There's not even a late fee, which there should be Right, and they don't, you know, address property in good condition or paying taxes and insurance. So all those things are important because if they don't, then it, you know, leaves the seller high and dry. Yeah, that makes sense.

Speaker 3:

But it also protects the buyer, because if you are fulfilling your obligations and the seller doesn't give you the warranty at the end of the deal then you know they're not doing what they said either, right, so I can't help when the people don't, you know, do fulfill their contract or they're in, you know, not in compliance or whatever. But I can send the proper notices and then they can show those notices to an attorney and then the attorney takes it from there.

Speaker 1:

But it's documented, but it has to be documented, yeah, so you don't have to own or finance something for like 30 years. No, like traditional mortgage style.

Speaker 3:

Yeah, okay, so I have several that are 15, 20 years, and then I do have like half of the other ones are like three and five years and then it balloons and then they either can renew that and keep you know doing what they're doing, if they so choose, or they can then get a loan and pay off the seller, and then I provide the payoff and where they're at in their actual mortgage, what principle they paid down, so they know what to get their loan for.

Speaker 1:

So, wow. So, and like we briefly touched on earlier, this is good for people who don't want to pay capital gains. So say, you have a large amount of equity in your home and, depending on where you're at, if you're moving it into another primary residence, you don't usually have to pay capital gains.

Speaker 3:

Yeah, but like if you're an investor, that's at the end of you want to sell everything, but you don't want to sell everything in the same year because it would just kill you in taxes. You can own or finance this one for a year, this one for two years and this one for three.

Speaker 2:

Start it now.

Speaker 3:

You know, however they want to do it, or whatever fits their. You know that makes sense, yeah, their scenario, but it's a good option. And then you know, someone like me can make sure that everyone's doing what they said they were going to do.

Speaker 1:

Because it's a lot of fears that people have with owner finances that.

Speaker 2:

No, trust nobody.

Speaker 1:

The eyes are not dotted, the teeth aren't crossed, things aren't going to. You know, people are going to not fulfill what they've done. It's a big trust thing.

Speaker 2:

Yeah.

Speaker 3:

And it is scary if you don't have an escrow company, because I've had closings where they did it between themselves and they didn't agree on the payoff and we literally were at a standstill and the realtor ended up paying the difference of the $600 that they wouldn't come to an agreement on. And the realtor was like, just take it out of my funds and let's get this closed and move on. So it's like that's the tricky part, right. There's not an actual program that keeps up with it, because you can't do it on your own. What they usually do is they print out the amortization schedule and then just check off the payments. Okay, now you're here and you pay exactly that. But if you pay any extra.

Speaker 2:

It's through a hot schedule you schedule yeah it affects the whole thing, and then I would feel better about trusting the middleman versus you, who have something to gain by lying Exactly, and I have something to gain by lying so.

Speaker 3:

I had to rebuild alone from 2019 because they buy or they thought they had paid it off. It was going to be paid off this year, at the end of last year, 2023. And so I said, well, don't make any more payments, let me get this. I had to get their whole history of the whole 15 years or whatever.

Speaker 3:

I have to rebuild the whole thing. You know, put every single payment in the system and they had overpaid by $1,500. And the seller did not agree with that. And they still have not turned the property over to the wire. What so that's? A nightmare situation. Yeah, and they tried to go to an attorney and the attorney said well, you can't, I can't do anything for you. You can't prove that you paid for it. You have to go to an escrow company to show all the payments coming out, so even their canceled checks were not sufficient because they didn't know how to apply to principal interest.

Speaker 3:

You know you can show them.

Speaker 2:

But how do they know that?

Speaker 3:

Yeah, yeah, because they did pay more principal down. In some months it is, and so you don't want to be in that situation. But they had an escrow company, which is good because they had paperwork, but the last two years they didn't, and so Well, the son does the time you did have one.

Speaker 3:

Right, so it is the escrow. The person that did their escrow gave the whole notebook, which is the original deed and the quick claim deed, and so they have all the documents to be recorded once they paid for it, but they won't turn them over.

Speaker 1:

And say they paid for it.

Speaker 3:

Yeah, so everyone's just, they stand still. Yeah, they have to get attorneys now and go to court. I work Mm-hmm.

Speaker 2:

It's been more money, yep, which is, or they could just pay you like 25 bucks, yeah, yeah.

Speaker 3:

Well, and they had to pay me to rebuild it and to get to that point, which is sad because it took me about 40 hours to do that.

Speaker 2:

Yeah.

Speaker 3:

But they were relieved because they got some answers, right. Right, because they didn't know where they were and the seller didn't know where they were and everyone just had their own opinion and they wouldn't approve anything. They had kept all their payments and the bank statements and everything, so that was good, but they still couldn't prove how it applied to the loan on the, you know, on the smear schedule, 20th year and the fourth month of the month, right?

Speaker 2:

That ridiculous schedule that I'm in the process, right, yeah, so so we're going to call these segments teaching, right, and you think?

Speaker 1:

Yeah, we can.

Speaker 2:

We can.

Speaker 1:

So, Terry, is there anything else about this process that you think people need to know?

Speaker 3:

I mean, like you said, it's not as scary or as daunting as you think. But you do also need to be connected with people that do know what they're doing. I mean, I get an attorney. If you don't have one, I have one that will write up the contract for deed, the All the if there it is a note in mortgage. There's two different avenues. You can go down where the seller is actually you know, does sign a warranty deed and signs it over to the buyer and then they have a mortgage on the property. If you have to foreclose on that, then you have to foreclose with the mortgage. The other way is you just record the contract for deed and you prepare a quick claim deed and a warranty deed with original signatures and when the buyer pays off the property, the warranty deed is recorded. Yeah, but the escrow company keeps all those original documents, so the buyer and the seller can't go take them and get them recorded randomly.

Speaker 2:

The middle man is the source.

Speaker 3:

Yeah. So, like I mean, if you're fulfilling your duty and you're, you know, and the property is paid off, then we, you know, let everybody know. Of course you've been getting payments the whole time, right, and then you know it's all good and well. But that's where it can get tricky and you can get into a bad situation if people you know don't do what they say they're going to do, and it could like this situation with the bat and with the nightmare is this person the seller was married at the time but he was getting going through a divorce. Now he's with a new person. The new person's been keeping up with the payments I think that they're married so she doesn't know how it all works and she's the one holding things hostage per se, and so she just wants a monthly payment. But I'm like it does not help. It works. We hit the end of that. You get, you've been paid Right, full over payment.

Speaker 2:

So anyways, it's unfortunate. Yeah, so pay my. What you're telling me is that if I decide, me and Justin need to go on a finance and then we just need to call charity.

Speaker 3:

Yeah, so call me before you close. Oops, you're trying to kill me. I don't know, what just happened. Anyways, call me before you close, because I have some that have called me after and it's a little late. No, no, no Because you have to like from the get go Like when you close at the closing table. Your loan is collecting interest.

Speaker 3:

The same day or the next day, just like a mortgage company, when I give you money, that money starts accruing interest. So when I do my paperwork I say you're closing on 15th your payments, doing the first. So that first payment is going to include that first 15 days of interest and then it'll collect the principal after that and then the full month of principal and interest will be collected after that. But if you contact me like two months after closing, then I have to like kind of you've already been paid some which wasn't correct, and then I have to come back and fix that. And then, right, you know, fix a few things, and then we, then we go from there.

Speaker 2:

Just know what we're getting into ahead of time. Yes, and then using a real estate agent.

Speaker 1:

we're for sure going to make sure we're encouraged that yeah.

Speaker 2:

On the front.

Speaker 1:

So this week we have completed our podcast with charity. If you guys have any questions about owner financing and escrow companies, just send us a message. You'll put my contact info in this.

Speaker 2:

Yes, it was show notes, show notes.

Speaker 1:

Yes, yes, it will Mm-hmm, so in equity escrow services LLC, llc.

Speaker 3:

Yeah, so come on one of those notes and you can get peanut m&ms if you come to the charity, yeah right, come see me, we'll talk about it. Figure it out, it's right by. Kfc. Yes, and we'll go from there. Yeah, see ya.

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Angela Ballard

Host
Contributor

Aundrea Rogers

Co-host