Seller Financing for Utah Sellers — Carrying the Note

Should I seller-finance at all?

Only if you can live with the day it goes wrong. “Legally allowed to” and “actually goes well” aren't always the same thing. Ask yourself three questions before the price: can you wait years for the balance, can you absorb a few missed payments, and can you stomach a foreclosure if it comes to that? If the answer to all three is yes, seller financing is a real option. If not, a smaller note behind a bank loan, or a conventional sale, may serve you better.

How does a seller-carry work when my home is paid off?

The buyer takes title at closing and signs a promissory note to you, secured by a trust deed recorded against the home. You become the beneficiary. The buyer pays principal and interest each month, ideally through a third-party servicer that keeps the ledger. Utah lets the two of you agree on any written rate; without an agreement the legal rate is 10% (Utah Code § 15-1-1). Run the payment, total interest, and any balloon in the seller-carry calculator.

What if I still have a mortgage?

Then the due-on-sale clause comes first. Most home loans let the lender demand the full balance when the home is sold, and federal law lets them enforce it (12 U.S.C. § 1701j-3(b)(1)). A wrap, a subject-to transfer, and a contract for deed are not on the exemption list (§ 1701j-3(d)).

The due-on-sale clause — read this first

Most home loans let the lender demand the full balance if the property is sold or transferred. Federal law lets lenders enforce that clause (12 U.S.C. § 1701j-3(b)(1)). A wrap, a subject-to transfer, and a contract for deed are not on the federal exemption list (§ 1701j-3(d)).

Nobody can promise you the lender won't call the loan. Plan as if it could happen: know the payoff, keep an exit ready (refinance, sale, or reserves), have a third-party servicer pay the underlying loan, and put the risk in writing so both sides signed knowing it.

FHA or VA loan? Don't wrap it. FHA and VA loans are generally assumable: with the servicer's approval, a qualified buyer can take over the loan itself at its current rate. A wrap keeps the seller on the hook and adds due-on-sale risk to a loan that could have been transferred properly. Ask the servicer about a formal assumption first.

A wrap can still work when the numbers leave room for a bad month and both sides plan for the lender's letter. The selling-with-a-mortgage guide and the wrap spread calculator show the math and the exposure.

Do I need a license to carry the note?

Usually not, but the count matters. Utah exempts a seller who takes back a trust deed as security for the purchase price (Utah Code § 61-2c-105(2)(i)). Federally, a person, estate, or trust financing one property in 12 months fits the one-property exclusion, which allows a balloon (12 CFR § 1026.36(a)(5)); up to three properties fits the three-property exclusion, which doesn't (12 CFR § 1026.36(a)(4)). The licensing checker walks through it in six questions.

What happens if the buyer stops paying?

You foreclose under the trust deed, on a timeline set by statute. For an owner-occupied home you send a 30-day notice first (Utah Code § 57-1-24.3), then record a notice of default (Utah Code § 57-1-24). The buyer has three months to reinstate by paying what's past due (Utah Code § 57-1-31). After the notice of sale, the home sells at auction with no right of redemption (Utah Code § 57-1-28). Realistically that's four to five months at minimum. The foreclosure timeline tool puts dates on it; the default guide explains each step.

How do I protect myself?

A real down payment. It's your cushion if you ever have to foreclose. See how much down to require.
Screen the buyer. The state Buyer Financial Information Sheet is a start (Buyer Financial Information Sheet (Jan. 1, 1999)); income and credit documents finish the job.
Record the trust deed. An unrecorded document can lose to a later buyer who records first (Utah Code § 57-3-103).
Use a servicer. Payments by app with no ledger means nobody can prove what's current. Read about third-party servicing.
Plan the taxes. An installment sale spreads your gain over the payments; your CPA and the servicing and taxes guide cover it.

What does Greg do for sellers?

He drafts the note and the trust deed for your deal, reviews the addendum, writes the closing instructions for the title company, and sets up the servicer, for a posted flat fee. Before any of that, a free 15-minute call where he tells you what he'd watch for.

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.