Vendor Contract – Who to write and manage the escrow contract

Am I crazy?

This is what my Real Estate agent says to me….

……We have spoken to a solicitor about Escrow agreements, she said they no longer use them, because its really taking out a second mortgage, they are too complicated and very risky.

Does any body do wraps in Qld? His solicitor is a 'property specialist lawyer'.

1. I do not want to manage the monthly accounts
2. I want the documents to be kept securely (where will I be in 6 years??) so they can be passed to purchaser upon completion of contract terms.
3. I want interest owing and paid calculated correctly and subtracted from the outstanding principle owing.
4. I want to provide the buyer with security to know that a neutral 3rd party is handling the funds each month

In the simplest of terms. A buyer has contract with me pay me $xxx per month including interest at xx% on a Vendor contract for 5 years for $XXXX. Each month they pay to a nominated trust account their payment. They are secure in knowing they made a payment and I am secure in knowing the payment is recorded and credited. If they fail to pay I have  neutral 3rd party to veriy they have not been making payments and are in breach of our contract. This literally can be used to foreclose on the property (subject to the first mortgage) if things go pear shaped.

Lots of benefits for all parties. Interest goes to me not to the bank (I like being a bank when I get paid interest), the buyer gets a lower overall rate, I get a higher price for my property, everyone is secure as a 3rd party handles $$.

Oh course banks don't like this… they loose out on being the bank.
It is all about cash flow…. I would it prefer it flow to me (as a return on my money/equity) than to the bank.

I rang Conveyancing Works in Brisbane who recommended Tony at Eaton Lawyers in Arrana Hills for doing vendor finance contracts.  He is very familiar with the process and will work with selling agents to ensure all parties are 'covered' legally and interests are secured against the property (rather than a simple contract).

When deals get down to how creative you can be to get your price or how to get the interest rate you can afford, then a blend of vendor finance works. The key is to make sure you are covered legally and have a good 'monitoring' system (escrow) in place to make sure the transaction(s) go off according to plan.

Tony emphasised that the purchaser must also list the vendor on any insurance policies until such time as the vendor has been completely paid out and vendor has released property lien to the purchaser. He said purchasers normally pay for the costs of a vendor contract agreement as they are the beneficiary of the agreement.

I can't speak to fee's for the service as I do not have anything to compare against. I have not gotten an email back yet with full schedule of fees from Eatons, however their std costs were within $50.00 of CW.

Time is money. For me I am happy to pay for legal advice, accounting advice, and in this case escrow services. $10-20 a month service fee for accepting and managing payments/documents is a small price to pay to get everything right, when you are talking tens of thousands of $$.

I've never used Eatons. Anyone have comments about them?