A seller carried note on a long held rental where an insurance quote nearly sank the closing is worth studying.

Here is a case worth studying, because the part that nearly killed it is the part most sellers never underwrite. Take a plain 2 bed 1 bath, about 900 square feet, three blocks from a school in an average part of town, owned nine years, free and clear, and always the property the owner puts last. The owner decides to sell on their own paper. Terms: 139,000 price, 15% down which is 20,850, note of 118,150 at 8% on a 25 year amortization with a 10 year balloon. Principal and interest 911.71. Escrow for taxes and insurance on top, collected by a servicer. The part that nearly kills it happens eleven days before closing. The buyer's insurance quote comes back at almost three times what she budgeted, because the roof is 22 years old and two carriers will not write it at all. She cannot close without coverage and she has used most of her cash on the down payment. The seller is not going to drop the price, so they split it: the seller credits 4,000 toward a roof at closing, the buyer puts up the rest, and the contractor gets scheduled before signing so the carrier will bind. Net to the seller is 16,850 of cash instead of 20,850 and a note secured by a house with a new roof, which is a fair trade. What to keep from it. Screen the buyer the way a careful landlord screens a tenant and then some, because anyone who has read enough applications knows what a thin one looks like, and add two years of tax returns on top. A licensed third party servicer from payment one makes escrow somebody's job. An attorney should draft the note and the deed of trust and get them recorded, and recording details and disclosure requirements differ by state, so that is not a form to fill in yourself. The thing sellers do not expect is that insurability is part of underwriting the buyer. A house that can barely be insured is a house the collateral depends on and the buyer cannot afford to keep covered.