Questions to ask before accepting a creative financing offer

Who holds title, and when?

Start with ownership. Will the deed transfer to the buyer at closing, or will you keep title until a later date? Each answer brings different risks. If title transfers, you need strong security for what you are still owed. If you keep title, you keep the liability and costs of ownership and may face complex rules if the buyer defaults.

Also confirm exactly who the buyer is. If an LLC or trust is buying, look it up in your state's business records, ask who signs for it, and ask whether anyone will guarantee the payments personally. A company with no assets and no track record gives you little to pursue if something goes wrong.

• Will a deed be signed at closing, and to whom: a person, an LLC, or a trust?
• Can the buyer assign the contract or resell before you are paid?
• Will the transfer be recorded in the county records?

What secures the money you are owed?

If any part of the price will be paid later, ask what protects you. Usually that is a promissory note plus a recorded mortgage or deed of trust. Find out what lien position you will hold and whether any other loan will rank ahead of yours.

• Is there a written, signed note with the rate, payment schedule, and maturity date?
• Is your lien recorded, and in what position?
• Is there a personal guarantee if the buyer is an LLC?
• What are the default and cure terms?

What happens to your existing mortgage?

In a subject-to deal, the buyer takes the property while your loan stays in your name. Your credit remains tied to that loan, and most mortgages contain a due-on-sale clause. Federal law generally allows lenders to enforce these clauses outside a short list of exceptions in 12 U.S.C. 1701j-3. Ask who makes the payments, how you will verify them, and what happens if the lender demands payoff.

• Will you get online access or monthly statements to confirm payments?
• Is there a plan and timeline to refinance or pay off your loan?
• Who holds the escrow balance and pays taxes and insurance?

Insurance, servicing, and escrow

Ask who will insure the property and how your interest will be shown on the policy. Ask whether a professional loan servicer will collect payments and keep records, or whether payments will come straight from the buyer. Confirm that closing will be handled by a neutral title company, escrow agent, or attorney who holds funds and records documents.

• Will you be named as mortgagee, loss payee, or additional insured where appropriate?
• Who chooses and pays the servicer?
• Who chose the closing company, and did you verify it independently?

Licensing and lending rules

Federal rules under Regulation Z, including 12 CFR 1026.36, affect who may arrange financing on a home and include limited exclusions for sellers financing their own property. States add licensing and disclosure requirements, and some regulate contracts for deed and lease options closely. If the buyer will live in the home, consumer protections are more likely to apply.

Ask whether a licensed loan originator, a real estate attorney, or both will be involved. Also ask whether the buyer or anyone helping them holds a license that applies to this kind of deal in your state.

Red flags and scam warnings

Most buyers are honest, but creative financing attracts some people who are not. Be cautious if you see any of these:

• Pressure to sign today or a refusal to let your attorney review documents
• Requests that you sign a deed before closing or outside a title or escrow office
• Promises to stop a foreclosure in exchange for an upfront fee
• Wiring instructions that arrive by email or text and change at the last minute
• A buyer who will not put the price, payment terms, or timeline in writing
• Vague answers about who will actually own the property after closing

Getting good advice, and where Prominent fits

A real estate attorney can review the documents, and a tax professional can explain how payments over time may be reported. If anything seems wrong, you can report fraud to the Federal Trade Commission and find consumer tools through the CFPB.

Prominent Cash Offer buys houses nationwide for cash in any condition. On cash purchases there are no fees or commissions, Prominent pays the closing costs, you choose the closing date, and you get a written offer with no obligation. Flexible arrangements are evaluated case by case, and not every property, seller, or state qualifies. Every question on this list is fair to ask Prominent too.