Advice to Home Sellers
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Persons who sell their homes under conditions where the purchaser “assumes” the existing mortgage should take special precautions to protect themselves against the purchaser’s later default on the assumed loan. First, in the Contract of Sale and at closing, the Seller should insist upon the Purchaser executing and delivering a Deed of Trust to Secure Assumption which should then be filed in the real estate records of the county. This Deed of Trust to Secure Assumption creates the legal rights for the Seller to reclaim the property and protect the Seller’s interest in the event the purchaser defaults on the loan. A Seller should understand that simply because the purchaser “assumes” the Seller’s mortgage debt, the Seller is not released from responsibility or liability on the debt. In the event the purchaser fails to make the installment payments on the mortgage debt, the lender may call the total note due and foreclose its deed of trust lien or mortgage. Such a foreclosure would show up as a blot on the Seller’s credit. If the foreclosure sale resulted in a loss to the lender, the lender could pursue the Seller for a deficiency judgment. This means that a Seller should be wary of selling real estate on an “assumption.” Finally, in addition to taking the Deed of Trust to Secure Assumption, the Seller should keep the mortgage company notified at all times of the Seller’s current mailing address. The existing deed of trust usually specifies that the mortgage company can send all notices of default to the property address. This means that the lender could send notices of default to the property address and the Seller would never know the mortgage note upon which he is liable is in default. This would result in quite a surprise to the Seller to have a foreclosure on the Seller’s credit report. |
