Title & Escrow Resources

Seller Financing Explained

In a traditional sale, the buyer borrows from a bank and the seller walks away with cash at closing. In a seller-financed sale, the seller takes the bank's place: instead of receiving the full price up front, the seller accepts a down payment and lets the buyer pay the balance over time, with interest.

The structure is straightforward. The buyer signs a promissory note promising to repay the seller on agreed terms, and that note is secured by a deed of trust recorded against the property. The buyer takes title and possession; the seller holds a lien until the note is paid.

Why do people choose it?

• Buyers who are self-employed, rebuilding credit, or purchasing unique property can close without conventional underwriting.
• Sellers can attract more buyers, negotiate a stronger price, earn interest income, and potentially spread capital-gains taxes across years.
• Both sides benefit from faster closings and negotiable terms — rate, payment schedule, and balloon dates are all on the table.

Because there is no bank enforcing standards, the paperwork carries all the weight. A neutral title company confirms the seller actually holds clear title, prepares the closing through escrow, records the documents in the right order, and issues title insurance — protecting both parties the same way a conventionally financed deal would.

Wrap Mortgages

A wraparound mortgage — usually just called a "wrap" — is a form of seller financing used when the seller still owes money on their own loan. Rather than paying that loan off at closing, the seller creates a new loan to the buyer that "wraps around" the existing one.

Here's the flow of money: the buyer makes one payment to the seller (or, better, to a neutral servicer) on the wrap note. Out of that payment, the seller's original underlying loan gets paid, and the seller keeps the difference. If the seller's old loan is at 4% and the wrap note is at 7%, the seller earns the spread on the wrapped balance.

Wraps are powerful but have real risks that both sides should understand going in:

• Due-on-sale clauses. Most underlying loans give the original lender the right to call the loan due when the property transfers. The parties should understand this risk before structuring a wrap.
• Payment dependency. The buyer's equity depends on the seller actually forwarding payments to the underlying lender. A third-party loan servicer that pays the underlying loan first removes that leap of faith.
• Insurance and taxes. Escrows for taxes and insurance need to be clearly assigned so nothing lapses.

Careful document preparation, full disclosure of the underlying loan, correct recording, and professional servicing are what separate a clean wrap from a future dispute — which is exactly where an experienced title and escrow team earns its keep.

Carryback Financing

Carryback financing — sometimes called a seller carryback or seller second — is when the seller finances a portion of the purchase price rather than the whole thing. The buyer might bring a down payment and a bank loan for most of the price, and the seller "carries back" a note for the remainder.

Example: on a $500,000 purchase, the buyer puts $50,000 down and qualifies for a $400,000 first loan. The seller carries back the remaining $50,000 as a second lien, paid monthly over five years. The deal closes; the seller receives most of their proceeds now and the rest, with interest, over time.

Key points to negotiate and document:

• Lien position. A carryback note is usually secured in second position, behind the primary lender. That affects the seller's remedies if the buyer defaults.
• Lender approval. Institutional first lenders have rules about secondary financing — it must be disclosed, never hidden.
• Terms. Interest rate, amortization, balloon date, late charges, and prepayment rights all belong in the note, not in a handshake.

Handled openly and papered correctly, a carryback bridges the gap between what a buyer can borrow and what a seller wants for the property — often the difference between a deal closing or dying.

Promissory Notes

A promissory note is the written promise to repay a debt — the document that actually creates the loan. Whether the lender is a bank or a seller carrying financing, the note is where the deal's money terms live.

A well-drafted note spells out:

• Who is borrowing and who is being repaid
• The principal amount and interest rate
• The payment amount, schedule, and where payments are sent
• The maturity date, and any balloon payment due at the end
• Late charges, default terms, and prepayment rights

It helps to keep two ideas separate: the note is the debt; the security instrument — in Utah, typically a deed of trust — is what connects that debt to the property as collateral. The note says "I owe you"; the deed of trust says "and this property guarantees it."

Two practical tips from the closing table: keep the original signed note somewhere safe, because it may be required to enforce or release the debt later, and consider professional loan servicing for private notes — clean payment records prevent most disputes before they start.

Deeds of Trust

A deed of trust is the recorded document that secures a loan against real property. Utah, like many western states, uses deeds of trust rather than traditional mortgages in most transactions.

Where a mortgage has two parties, a deed of trust has three:

• Trustor — the borrower who owns the property
• Beneficiary — the lender the debt is owed to
• Trustee — a neutral third party (often a title company or attorney) holding limited legal authority over the property on behalf of both

The practical difference from a mortgage shows up in enforcement. If the borrower defaults, the trustee can generally conduct a non-judicial foreclosure — a trustee's sale following statutory notice periods — without a court lawsuit. That makes deeds of trust faster and less costly to enforce, which is why lenders (including seller-financers) prefer them.

When the loan is paid off, the process runs in reverse: the beneficiary requests a reconveyance, and the trustee records a deed of reconveyance releasing the lien. Making sure that release actually gets recorded is one of the quiet, important jobs your title company handles — an unreleased deed of trust from a long-paid loan is one of the most common title problems we clear.

How Closing Works

"Closing" is everything that happens between a signed contract and the moment ownership officially changes hands. Here's the path a typical transaction takes at Lone Star Title:

• 1. Escrow opens. The signed contract and earnest money are delivered to us. We open a neutral escrow file that holds all funds and documents until every condition is met.
• 2. Title search. We examine the county records — deeds, liens, easements, taxes, judgments — and issue a title commitment showing exactly what must be resolved before we can insure clear title.
• 3. Clearing requirements. Old loans get payoff statements, liens get released, and any title issues get cured. This is where experience quietly saves closings.
• 4. Documents and figures. We prepare the deed and closing documents, coordinate with any lender, and build the settlement statement showing where every dollar goes.
• 5. Signing. Buyer and seller sign — together or separately. Bring a government-issued photo ID, and confirm wire instructions by phone with our office before sending funds.
• 6. Funding and recording. Once all funds are in, we record the deed (and any deed of trust) with the county. Recording is the moment ownership legally transfers.
• 7. Disbursement and policy. We pay off old loans, disburse seller proceeds and commissions, and issue the title insurance policies that protect the buyer and lender going forward.

Most residential closings run two to four weeks from contract to recording, driven mainly by financing and how quickly title requirements clear. Our job is to keep every step moving and keep you informed — accurately, on time, and with no surprises at the table.