Owner Finance – Bond for deed or vendors lien?

Today on Law Talk we look at which is the better type of owner finance arrangement, a vendor’s lien or a bond for deed. In an owner finance arrangement, the seller is also the lender. The buyer or debtor makes monthly payments to the seller as opposed to a bank or lending institution. Owner finance situations usually come into play when the buyer does not have a good credit history and cannot borrow the full purchase amount form a bank, but it can make monthly payments. We generally see two basic concepts when it comes to owner finance sales: (1) the vendor’s lien and (2) the bond for deed. In vendor’s liens, ownership is transferred to the buyer on the front end. The buyer simultaneously grants a lien to the seller on the property. If the buyer defaults, the seller may foreclose. The advantage to the seller is the seller no longer has ownership responsibilities. So, if the house burns down or is destroyed in a hurricane, it’s the buyer’s problem. If someone gets injured on the property and wants to sue the owner, it’s the buyer’s problem. If the parish files a lien on the property of improper mechanical sewerage, or junk cars, or tall grass; it’s the buyer’s problem. The downside to the seller is that if the buyer defaults, then the seller must go through a sheriff sale foreclosure process in order to get the land back. This can be costly and take time. The bond for deed on the other hand works exactly opposite. The ownership stays with the seller until all of the payments are made. This could be for a period of many years. Once the buyer makes all payments, then, at that time, the seller is obligated to deed the property to the buyer. The title does not transfer until all payments are

Hello everyone and welcome to another edition of law talk i’m mark the director jetson jonathan law dog fontenot native of cameron parish louisiana like charles attorney covering all of your legal needs from the marshes of cameron parish to the courtrooms of lake charles this edition of law talk owner finance owner finance should we go bonfir deed or vendor’s

Lien bonfer deed or vendors lane what do you think law dog i know nothing of either of those topics bond for deed so the question is do you want to own it or do you just want to pay on it and then own it after you pay it off okay what’s the what’s the advantage of owning it all right so vendor’s lien if you go on an owner finance arrangement that’s where the

Seller sells the buyer the property but instead of making monthly payments to a bank you’re making monthly payments to the seller the payment is in my name in the meantime and the vendor’s lien the title transfers at the time of purchase okay so in a vendor’s lien the seller is rid of the responsibilities of ownership the seller is no longer responsible for the

Taxes because he doesn’t own it anymore the tax assessors will show tax assessors will cut it over into the buyer’s name so the seller is no longer responsible for the ownership responsibilities because the seller doesn’t own it anymore so the seller has no liability for the taxes he has no liability for any kind of trips and falls or any kind of environmental

Hazards or any kind of you know parish liens parish ordinances zoning so the disadvantage to the buyer on that kind is what the buyer is the owner and has all ownership responsibilities just the obligation right now here is a disadvantage to the seller the disadvantage to the seller is that if the buyer defaults if the buyer defaults the seller has to go through

A foreclosure process just like a bank it’s expensive it takes time big judicial process a lot of money got to get the sheriff’s involved got to seize it got to sell it at a share sale etc and so forth so the advantage to the seller is that the seller is rid of the responsibilities of ownership disadvantage if he wants to foreclose or he wants to if the buyer

Quits making payments gotta go to the foreclosure process bond for deed exactly opposite bond for deed the seller is not really a seller the seller is like a glorified landlord and there is a contract or a bond for deed and it simply says that the buyer is making the payments when the buyer pays the seller off the seller at that time mixing the owner will

Be contractually obligated to deed the property so to deed the property to the buyer at that time if you missed the payments on the bond for deed how does it revert to the owner or do well never becomes the the owner has never lost title to the property so then at that point in time the owner can go through an eviction process now there’s going to be a lot

Of peculiarities in a bond for deed contract that don’t necessarily apply but in general theory the seller the bond for deed seller is still the title owner to the property so if the buyer quits making the payments simply a victim avoids the foreclosure cost avoids the foreclosure expense the danger is is that it’s really not a good deal for the buyer because

The buyer has less protection if the buyer misses payments the buyer is more subject to losing the land it’s usually for a situation where the buyer doesn’t have quite the credit history or the credit value and a little bit more of a higher risk so the seller likes to hold on to the property and the bond but the buyer made 99 of 100 payments and didn’t miss the

Hundreds he’s still subject to being evicted wow okay you actually have had a contested issue on that very map yeah and sometimes uh some sellers will say payment number 100 sorry you haven’t paid your insurance and paid the taxes you violated it we’re going to go to litigation right so bond for deed not as preferred for the buyer but it’s still a viable option

So bond verdeed or vendors lien vendors lien title transfers at the time of purchase bond for deed title transfers at the end of payments this has been another edition of law talk a public service of the southwest louisiana law center and cbs lake charles

Transcribed from video
Owner Finance – Bond for deed or vendors lien? By CBS Lake Charles