Washington sellers carry financing two ways, with a deed of trust or with a real estate contract. Note buyers price the two differently, so the first job is to know which one you hold.
What shrinks an offer on a Washington note before anyone studies the payer.
The same worksheet comes with every offer.
| Remaining balance | $129,400 |
|---|---|
| Payments left | 168 |
| Buyer’s target yield | 8.0% |
| Purchase price | $115,000 |
| Discount from balance | 11.1% |
| Our fee | shown on every offer |
| Sell the whole note | Sell 60 payments | Keep it | |
|---|---|---|---|
| Cash today | $115,000 | $56,200 | $0 |
| Payments still coming to you | None | 108 payments of $1,140 | 168 payments of $1,140 |
| Total you receive | $115,000 | $179,320 | $191,520 |
| What you give up | Every future payment | The next five years | A lump sum now |
Illustrative example. Totals add up the payments as scheduled; they assume the payer keeps paying and are not adjusted for the value of money over time.
The promissory noteThe mortgage or deed of trustA payment historyThe closing statement from the saleThe Cascades split Washington in two, and the notes follow the split. West of the mountains the collateral is mostly housing: a rental in Tacoma or Everett, a house in Olympia or Bellingham, a cabin on the Olympic Peninsula, a lot on Whidbey or in the San Juans. East of the mountains there is more ground than buildings, with orchard and vineyard parcels around Wenatchee, Yakima and the Tri-Cities, wheat land on the Palouse, recreational acreage in Okanogan and Stevens counties, and houses in Spokane.
Owners in both halves carry financing. Some do it to spread the tax on a sale over several years, which is a question for a CPA. Others do it because the buyer could not get a bank loan on raw land or an older manufactured home. Years later the seller is still collecting and wants to know what the remaining payments would fetch as a lump sum.
Seller financing in Washington commonly takes one of two forms, and a note buyer prices them differently.
| Point of difference | Note with a deed of trust | Real estate contract |
|---|---|---|
| Who holds title | The payer. A trustee holds a security interest for you. | You do, until the last payment is made. |
| After a default | The trustee can generally sell the property without going to court. | Commonly forfeiture, a process that ends the payer’s rights under the contract. |
| Other names | The security document commonly used for Washington home loans. | Called a land contract or contract for deed in other states. |
| What you sign over | The note, with an assignment of the deed of trust. | A deed to the property, with an assignment of the contract. |
Farm land can be treated differently from a house, and the out-of-court route may not be open on every property. Practice varies with the land and with the wording of the document, so have a Washington attorney or the escrow company read yours before you describe it to a buyer. A real estate contract is sold the way any land contract is, with a deed to the property changing hands alongside the contract.
A buyer works backward from the return they want on their money to a price for your payments. The less likely a loss looks, the lower the return they will accept and the more you are paid.
In Washington the first thing they settle is which document you have and whether it was recorded with the county auditor. A real estate contract that was signed and never recorded narrows the field of buyers, because nothing in the public record shows the payer’s interest or yours. Next comes the property. A house in King or Pierce County is simple to value. An island lot reached by ferry, a parcel with no proven water, or forty dry acres near Republic takes more study, and the offers spread further apart, since the type of property changes what a note is worth to each buyer.
Read the heading on the first page of what you signed at closing. It will say Deed of Trust, in which case a separate promissory note goes with it, or Real Estate Contract. Then look for the auditor’s recording number, which is printed or stamped on a recorded copy. Tell us which document you hold and whether it carries that number when you give us the details of your note, along with whatever shows the payments received.
Deeds of trust are commonly used in Washington, and a trustee can generally sell the property out of court after a default. Mortgages and real estate contracts are also in use. A buyer reads your recorded document to see which applies.
Yes, though not every note buyer takes them. Because you still hold title, the buyer takes a deed from you along with an assignment of the contract. Your payer's rights carry over unchanged.
It can. A buyer looks at water, access, the down payment and the payer's record, and may ask whether the land is in active agricultural use. Rules for farm land can differ from rules for a house, so ask a Washington attorney how default would work on yours.
Yes. A buyer prices the property and the payer, wherever you live now. Documents can be signed in front of a notary where you live and sent to the title or escrow company handling the closing.