When selling a piece of property, the last thing you ever want to do is have to take it back, but there are times you have no other choice. If the buyer isn’t paying the payments, it makes it difficult for the seller to continue making the mortgage payments to save his or her credit. If your buyer is consistently late, it may be time to send a demand letter.
One of the biggest advantages to selling property with seller financing on a Real Estate Contract is that there is no judicial foreclosure needed to get someone out of the house when they default on their payments. With traditional mortgages, the lender may have to wait for up to nine months for the judicial proceedings to take place to get their property back.
A demand letter can be sent out the very next day after a missed payment. There is no such thing as a “grace period” on a Real Estate Contract. Just because the late fee doesn’t kick in until a certain date does not mean that the seller does not have the right to send out a demand letter earlier.
A demand letter is usually prepared by an attorney, which we strongly recommend, but it can be sent by the seller on his own. The letter demands that the buyer pay the payments that are due, any late charges due and the attorney’s fee for writing the letter. The letter will also state the cure-default period for the buyer to cure the demand. All of these things can be found in the Real Estate Contract. The attorney’s fee and the cure-default period can be found under the section for “Seller’s Rights”.
The typical cure-default period is 30 days, but some contracts have as much as 90 days or more. It just depends on what the buyer and seller agreed to in the contract. If the buyer fails to make the payment within the allowed time, the seller may terminate the contract and take the deed back from the escrow agent.
If you have any questions about Real Estate Contracts or demand letters, please be sure to speak with a real estate attorney. Please remember that anything written in our blog should not be taken as tax or legal advice. Always consult with your attorney before making any decisions.