The Ten Commandments of Private, Hard Money or Seller Carry Back Lending
These 10 spiritual principals were received by James M. Allen in 1993 on top of Mt. La Jolla, California. Originally created for the edification of private hard money lenders, the principles largely apply to any seller thinking of becoming the bank on their own property:
1. ALWAYS take possession of the original note.
2. ALWAYS make sure that the deed of trust is recorded.
3. ALWAYS make sure that you have title insurance showing your deed of trust in the proper priority.
4. ALWAYS make sure that you record a “Request for Special Notice” with respect to all senior deeds of trust at the time you make the loan, and promptly when your address changes.
5. ALWAYS personally inspect the property which is security for your deed of trust. Would you like to own this property in this neighborhood?
6. NEVER lend money on a deed of trust where you cannot afford to keep prior payments current while you foreclose your own deed of trust.
7. ALWAYS insist that the note and deed of trust show you as the original beneficiary on a new loan, not the broker who arranges the loan.
8. ALWAYS make sure that the note is assigned by separate assignment on the note or permanently attached to the note, and by recorded Assignment of the deed of trust when you are buying a “seasoned” note.
9. ALWAYS keep your original notes and deeds of trust in safe deposit boxes, or in similarly secure environments. You can keep copies in your files for working reference.
10. ALWAYS make sure the property taxes are paid current, that prior deeds of trust are kept current, and that hazard insurance is adequate, in force, and premiums are paid current.
My friend, I testify that if you will heed these principles, and your attitude improves greatly, you will one day enter Seller Financing Heaven. Hallelujah and Amen.