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In a traditional home purchase, banks or mortgage lenders are the ones holding the loan. Everyone generally knows how that works. In seller financing, the rules are a little different. For many buyers and sellers, one of the most common questions is: who maintains the note?
Let’s break that down and explain what it really means.
What Is a Promissory Note in Real Estate?
When a home is sold with seller financing, the seller becomes the lender. Instead of handing over cash and walking away, the seller gives the buyer time to pay for the property over a number of years, just like a bank would.
This means the seller keeps ownership of the loan itself. They receive monthly payments from the buyer and are entitled to enforce the loan terms, including charging interest and, if necessary, initiating foreclosure if the buyer defaults.
The Role of the Seller as the Lender
When a seller holds the note, they aren’t just waiting for checks to come in. They also carry responsibilities such as:
- Keeping track of payments and balances
- Sending statements to the buyer
- Managing late fees or missed payments
- Filing appropriate tax forms
- Maintaining a paper trail for legal and financial compliance
From the buyer’s point of view, it’s critical that payments are credited correctly, balances are clear, and all terms are documented and honored. Without a professional servicer involved, buyers sometimes feel unsure about where they stand with their loan. This is where things can get complicated, especially for sellers who aren’t experience as lenders.
Buyer Obligations Under a Seller-Financed Loan
Buyers in seller-financed transactions take on the same responsibilities as traditional mortgage borrowers. This includes:
- Making on-time monthly payments
- Maintaining and repairing the property
- Keeping property taxes and homeowners insurance current
- Avoiding actions that could reduce the value of the home or increase risk to the lender
Failure to meet these obligations can trigger default, just like with a bank loan.
Who Services the Loan and Collects Payments?
While a seller can handle a deal themselves, this is where Promissa adds real value. Our platform brings structure, transparency, and trust to seller-financed transactions, making the process smoother and more secure for both parties. Promissa offers a full-stack platform where:
- Sellers can listing properties and originate & service loans seamlessly
- Buyers can see their balances, make payments, and track equity
- Both parties benefit from clear documentation and automation
- Compliance tasks like tax reporting and payment tracking are handled behind the scenes
We also offer transactional services like underwriting guidance, digital closings, and escrow coordination. This makes the whole process feels as familiar and professional as a traditional mortgage.
Why It Matters Who Holds the Note?
Understanding who holds the note and what it means is essential to building confidence in seller-financed transactions. With Promissa, you don’t need to be a real estate expert or financial pro to offer or buy a home with financing. We make it easy, compliant, and transparent so both sides can focus on the opportunity, not the paperwork.
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