When Carrying Real Estate paper insist on property insurance

process that traditional financing would use. By that I mean, make sure to include all items in the note contract that a bank would, like require the buyer(payor) to purchase an insurance policy with the proper coverage on the property. The note holder (seller) should require the payor to purchase an annual property policy that at a minimum covers the balance of the note.

Fires do happen and if you are the note holder of a property that just went up in flames, you want to have piece of mind that the payor has adequate property insurance to cover for the loss. If property insurance with adequate coverage has not been put in place then you just watched the collateral secured to your note go up in flames. What are you going to foreclose on if the payor decides to quit paying you and walk away?

The policy should designate the note holder as the Loss Payee. This designation will ensure that the he or she is informed on the status of the policy and receive a certificate of insurance with each renewal. Every year the note holder should insist that the policy be renewed with adequate coverage for property loss.

Often when seller financing is the solution to a real estate transaction, the insurance policy is the item that is overlooked because it is the responsibility of the payor. Note Owners should require home buyers as a part of the contract to purchase adequate property insurance. Selling a note that does note have adequate property