Question: Ten years ago we purchased 40 acres of vacant land near Coolidge with seller carryback financing. In other words, we signed a promissory note to pay the seller monthly payments secured by a deed of trust on the 40 acres of vacant land. The final monthly payment to the seller is due next month. When I make this final monthly payment to the seller, what happens?
Answer: Seller carryback financing is a mortgage from the seller, just like a mortgage from Bank of America or any other mortgage lender. After you make the final payment to the seller on the seller carryback financing, your seller (or any other mortgage lender like Bank of America) is required under Arizona law to record within thirty days a Deed of Release and Reconveyance (“Recon Deed”). After the recording of this Recon Deed by your seller, the seller carryback financing will be removed as a lien against your 40 acres. If a Recon Deed has not been recorded within thirty days after the final payment, you should give written notice to the seller. If the seller still does not record this Recon Deed within the next twenty days, the seller is liable to you for a $1,000 penalty.
Note: You apparently did not have a servicing agent appointed by you and the seller to handle the paperwork for the mortgage payments. Any seller carryback financing should always have a servicing agent, usually a title company. For a small monthly fee the servicing agent will receive the buyer’s monthly payment, pay the property taxes and insurance for the home, and disburse the rest of the buyer’s monthly payment to the seller. After the final monthly payment is made by the buyer, the servicing agent generally has the Recon Deed already signed by the seller for immediate recording.