How a two-year clean payment history hid a lapsed policy and unpaid taxes on a carried note

The servicer point is the whole post. Servicing on a carried note runs around 30 a month, and it buys escrow collection, tax disbursement, the 1098 paperwork, and someone else's phone number for the buyer to call when he is short. That fee reads like laziness right up until the alternative is a 6,150 surprise.

Honestly quill, 6,150 that you can add to the balance if the note lets you is a light bill for this lesson. The thing that scares me in your post is the 14 months with no insurance. A total loss there and your collateral is a vacant lot with a slab, and your buyer walks away from a note secured by nothing worth taking back. The tax bill was recoverable. The insurance gap wasn't, you just got lucky on it.

Did you look at anything on him before closing? I'm reading everything about tenant screening right now and it sounds like carrying a note is that same job with a much longer tail. Two banks turned him down and I want to know what they saw.

Hollow, do the servicers do the tax watching themselves or is that still on the note holder? Trying to understand what's actually in the fee.

Same principle on raw land, smaller numbers. Taxes on a 12 acre parcel I sold on payments run 340 a year, which is small enough that nobody escrows it and small enough that a buyer forgets it exists. I still ask for the receipt every January. Cheap habit.

Went through this twice. What does loss payee actually mean, is that different from being named mortgagee? I thought those were the same box on the form.

The part I didn't expect is that not paying taxes might not count as default. So a buyer can be perfectly current on the loan and still be destroying your security? That reframes what "on time every month" is worth to me.

The uninsured 14 months would keep me up. I've been in houses after fires and after a supply line lets go on a second floor, and the second one alone is 40 to 60k of work by the time you're done with the flooring and the drywall. Your buyer with no coverage and no cash isn't fixing that. He's mailing you the keys and you're the one holding a wet house.

Running cairn's number out, 30 a month for 20 years is 7,200, which is more than quill's tax bill. But the servicer also collects the payment, tracks the amortization, handles the year end statements, and takes the phone call. If I'm choosing between paying that and doing it myself on a spreadsheet, the spreadsheet is where the escrow gets forgotten.

Question about the balloon. Three years out from it now, does the amount advanced get added to the payoff, or does it just get eaten? And if it's added, will the buyer be able to refinance a balance higher than he expects? That looks like a small problem that turns into a bigger one on a specific date.

Also worth knowing for anyone who ever wants out of a note. Note buyers routinely check delinquent taxes on the parcel before pricing an offer. A clean pay history with two years of unpaid taxes behind it prices worse than a slightly messier pay history on a parcel that's current. Anchor's question about whether the advance rides on the payoff matters for that too.

Owners who carry notes commonly find this out the same way, by mail. One found the notice from an insurance carrier instead of the county, which was luckier. Nobody discovers it because they were checking.

Twenty years of holding land has taught me that the only obligations that get met are the ones somebody verifies. Your note said he shall pay the taxes and he shall keep it insured, and shall is a word with no teeth unless there's a receipt attached to it. Escrow it and go back to not thinking about it, which is the reason you carried paper in the first place.