how to have seller finance a home purchase that will need to be remodeled?

Am thinking of purchasing an older home that needs to be remodeled. Would like to put money down against a seller carry-back of the balance of the purchase price. How can I structure the deal to ensure that the seller, who is financing the purchase, has protection during the remodeling stage.

Public Comments

1. Sounds like a great question for your realtor or an attorney.
2. I assume that you want to make the seller comfortable with the fact the improvements will be completed without outstanding mechanics liens against the house. You may be able to purchase a performance bond with the seller as the beneficiary. Talk to your insurance broker. If you can get one (might not be available unless you are a GC) then you can build that requirement into the note or trust deed. Another alternative would be to put the improvement money into an escrow or other third party account earmarked for improvements or the seller. If you are looking for a company to prepare the promissory note and/or deed of trust you may wish to check out http://www.circlelending.com they do private party loan administration and the like. Get title insurance regardless of how you finance your purchase.
3. Due to the complexity of the deal and depending upon how much remodeling you are doing, I would go down to a local title compay or fee attorney and get some advice on the best way to handle that. If you do it wrong, it could really mess up the title.
4. Simple - ask for it. If the seller agrees, all you need do is put it in the contract - then it will be up to the seller to insure the repairs on the house.
5. Just standard builders risk, with the mortgage holder listed on the policy. Be sure to use licensed, bonded and insured contractors. Use contracts.