Seller financing? Consider a real estate contract

The Washington Legislature created the Deed of Trust Statute in 1967. RCW 61.24 et. seq. As a result, over the next forty years it became common practice to secure seller-financed real estate transactions with a deed of trust and promissory note. Because the Deed of Trust statute created an efficient, practical and timely method for a lender to realize on the secured collateral in the even of default, this made sense. That is no longer the case.

Prior to 1967 (and even after in the case of agricultural property) real estate contracts were typically used in seller-financed transactions. Sellers stopped using them because the Deed of Trust Act had created a system that was well-balanced between the rights and concerns of lenders and borrowers. They system was clear and unambiguous. The recent housing crises has changed this.

Foreclosing on a deed of trust is no longer efficient and predicable. Recent changes to the Deed of Trust Statute, while most likely warranted, have created uncertainties that were not there before.

Because of the upheaval in the housing market, all the parties in a seller-financed real estate transaction should look at using a real estate contract. These established financing vehicles have a long history which has been relatively undisturbed by the housing crises and the legislative changes to the Deed of Trust Act.

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