What the Utah Seller Financing Addendum Does Not Do
The Utah Seller Financing Addendum sets deal terms, but it is not a note or trust deed. A Utah attorney explains what it leaves undone and which documents you still need.
Informational onlyThis page is general information about Utah law, not legal advice for your situation. Reading it doesn't create an attorney-client relationship. Read the disclaimer.
The Utah Seller Financing Addendum does not create the loan. It sets the terms inside your purchase contract and picks the instrument. It is not a promissory note, not a trust deed, and not a fix for the due-on-sale clause on your own mortgage. Those documents and protections still have to be built separately.
Does the Utah seller financing addendum replace a promissory note?
No. The addendum is a term sheet attached to your Real Estate Purchase Contract. The promissory note is a separate document the buyer signs at closing, and it is what actually creates the debt.
The addendum is the state-approved form for seller-financed terms. The current version took effect October 20, 2021 (Seller Financing Addendum (state-approved form, Oct. 20, 2021)). It records what you and the buyer agreed to. Price, down payment, rate, term, payment amount, and a few key disclosures all go on it.
That is useful. It is also where many sellers stop, and that is the problem. A signed addendum feels finished. It is really a promise to finish later.
Here is a concrete example. You sell your Orem home for $450,000. The buyer puts $45,000 down, and you carry $405,000 at 7% over 30 years. The addendum says all of that. It does not say what happens on day 16 of a late payment, how a default is declared, or who pays the property taxes when the buyer forgets. The note and trust deed say those things.
If you want to see how the addendum is filled out line by line, read how to fill out the Utah Seller Financing Addendum. This article covers the other half: what the form leaves undone.
Is the addendum a promissory note or a trust deed?
It is neither. Section 1 of the addendum only chooses which instrument you will use: a note and deed of trust, or a note and all-inclusive deed of trust (Seller Financing Addendum § 1). The instrument itself still has to be drafted.
Think of Section 1 as a checkbox that points somewhere else. Checking "Note and Deed of Trust" means the deal will close with two more documents. One is the promissory note. The other is the trust deed that secures it.
Each document does a different job.
- The promissory note is the buyer's written promise to pay. It holds the payment schedule, late fees, the default rate, prepayment terms, and any balloon date.
- The trust deed is the security. It gives a trustee power to sell the property if the buyer defaults. It gets recorded with the county so later buyers and lenders see your lien.
- The addendum sits inside the purchase contract. It typically is not recorded, and it typically does not survive closing as the governing loan document.
If you are still deciding between instruments, the guide to choosing a seller-financing instrument in Utah compares the note and trust deed, the all-inclusive trust deed, a contract for deed, and a lease option side by side.
Does it address wraps' underlying-loan risk beyond disclosure?
Not really. The addendum lets you choose an all-inclusive deed of trust and prompts disclosure about any existing loan. It does not remove the due-on-sale risk or tell you how to manage it.
"Legally allowed to" and "actually goes well" are not always the same thing. A wrap is a good example.
Say you still owe $260,000 on your own mortgage at 3.1%. You sell for $450,000 with $45,000 down. You carry $405,000 at 7% on an all-inclusive note. Each month, the buyer pays you, and you keep paying your lender. You earn the spread between the two rates. The wrap spread calculator shows what that spread looks like over time.
What can go wrong comes first. Your mortgage likely has a due-on-sale clause. If your lender learns of the transfer, it can demand the full $260,000 balance. The addendum's disclosures put that risk on paper. They do not make it go away.
The form also leaves practical questions open:
- Who confirms each month that your underlying payment was actually made?
- What happens if the buyer pays you and you miss your own payment?
- Whose name is on the homeowner's insurance, and is your lender still listed?
- What is the exit plan if the lender calls the loan?
These are drafting and planning questions. The addendum was not built to answer them.
How do you manage the underlying-loan risk on a wrap?
You manage it with structure, money set aside, and a written plan. None of these steps is in the addendum. They go into the attorney-drafted note, trust deed, and side agreements. This is practice guidance, not a legal requirement.
What typically helps:
- Use a third-party servicer. The buyer pays the servicer. The servicer pays your lender first, then sends you the rest. Both sides get a clean payment record.
- Build a reserve. Many sellers hold back two to six months of underlying payments. On a $1,350 monthly payment, four months is $5,400.
- Get the insurance right. Make sure the policy names the right people, and that your lender's interest is still covered.
- Write the exit plan down. If your lender calls the loan, who refinances, and on what timeline? A buyer refinance clause in the note is common.
- Put the due-on-sale disclosure in writing. The buyer should sign that they understand the risk before closing.
None of this removes the risk. It does make the bad day more manageable.
Why does it warn that brokers can't ensure legal compliance?
Because they can't. The addendum itself warns that real estate brokers are not qualified or licensed to ensure the financing complies with the law (Seller Financing Addendum). It is telling you where the agent's job ends.
Your agent is a real ally in a seller-financed deal. Agents bring the buyer, negotiate price, and fill out the state-approved forms. That is a lot of work, and it matters.
But licensees have limits. They may not alter state-approved form boilerplate. They must use the approved addenda (Utah Admin. Code R162-2f-401b). So when a deal needs custom terms, the agent cannot write them into the form. Wrap provisions, servicer instructions, and reserve requirements are all custom terms.
The warning is not a criticism of agents. It is a boundary the form draws on purpose. Lending rules, default procedures, and tax reporting sit on the other side of that boundary. Those questions belong in documents drafted for your specific deal.
Which documents must still be drafted?
At minimum, a promissory note and a trust deed. Wraps and more complex deals usually need more. The table below shows what typically gets drafted after the addendum is signed. This is practice guidance.
| Document | What it does | Recorded? | Typically needed when |
|---|---|---|---|
| Promissory note | Creates the debt and the payment terms | No | Every seller-financed sale |
| Deed of trust | Secures the note against the property | Yes | Every note and trust deed deal |
| All-inclusive note and deed of trust | Wraps your existing loan inside the buyer's note | Yes (the trust deed) | You still owe on your own mortgage |
| Servicing agreement | Tells a third party how to collect and pay | No | Wraps, or any deal you do not want to self-service |
| Due-on-sale disclosure and acknowledgment | Puts the underlying-loan risk in writing | No | Any deal over an existing loan |
| Amortization schedule | Shows each payment's principal and interest | No | Every seller-financed sale |
On a $405,000 note, a gap in any of these documents can cost real money. A missing late-fee term means no late fee. An unrecorded trust deed may leave your lien behind a later creditor.
You can see which forms the state publishes on our Utah seller financing forms page. What we prepare, and the $750 that covers it, is on the services page. Terms like "beneficiary," "trustee," and "all-inclusive" are defined in the glossary.
What should you do if you already signed the addendum?
Get the closing documents drafted before closing day. A signed addendum is normally where drafting begins, not where it ends. Most sellers are in exactly this spot.
Here is what typically happens next:
- Gather the signed REPC and addendum. The terms in the note must match them.
- Confirm the numbers. Check the payment with the seller-carry calculator so the note matches to the penny.
- Pull your own loan statement if you still have a mortgage. The balance, rate, and payment drive the wrap structure.
- Decide who collects payments. A servicer, or you directly.
- Have the note and trust deed drafted and reviewed with both parties before closing.
- Record the trust deed at closing. That is what protects your position.
If something in the addendum does not match what you actually agreed, raise it now. Fixing a term before closing is much easier than arguing over it later.
What Greg would tell you
The addendum is a good starting point, and you should treat it like one. It tells everyone what the deal is, but the note and trust deed are what you will rely on if a payment is ever missed. If you still have a loan on the house, plan for the due-on-sale question before you close, not after.
Frequently asked questions
Does the Utah Seller Financing Addendum replace a promissory note?
No, the addendum sets the terms but does not create the debt. A separate promissory note, signed by the buyer at closing, is what makes the buyer's promise to pay enforceable as a loan.
Is the addendum recorded with the county?
No, the addendum is typically not recorded; the trust deed is. The recorded trust deed is what puts the public on notice of your lien against the property.
Can my agent add wrap terms to the addendum?
Not by changing the form's boilerplate, because licensees must use approved forms as written. Custom wrap provisions usually go into the note and trust deed an attorney drafts.
I already signed the addendum. Is it too late to get documents drafted?
No, signing the addendum is normally the point where drafting begins. The note and trust deed are prepared after the terms are set and before closing.
Does the addendum protect me if the buyer stops paying?
Only indirectly, through the documents it calls for. Your real protection comes from a well-drafted note and a recorded trust deed with clear default terms.
This site is for general information about Utah law and is not legal advice. Using it does not create an attorney-client relationship. Every transaction is different — talk to an attorney about yours. Attorney advertising.
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