Quick Answer
A creative finance closing checklist should cover the transaction structure, property ownership, existing debt, liens, new financing terms, title requirements, disclosures, servicing, insurance, taxes, recording, and post-closing responsibilities. This checklist helps ensure nothing is overlooked.
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This checklist is also available as a downloadable resource. Use it to prepare for any creative financing transaction.
Transaction Structure
- Identify the specific structure (wrap, subject-to, assumption, owner finance, carryback, hybrid, etc)
- Confirm that all parties understand the structure
- Document the structure in the purchase agreement
- Verify that the structure is legal in the property jurisdiction
Property and Ownership
- Confirm current owner and vesting
- Verify the owner authority to sell
- Check for entity ownership issues (LLC, trust, corporation)
- Order Property DNA Report for early research
Existing Debt
- Identify all existing mortgages and liens
- Document loan numbers, balances, rates, and payment terms
- Review loan documents for due-on-sale clauses and transfer restrictions
- Determine whether the existing loan is assumable
Liens and Encumbrances
- Review title commitment for all exceptions
- Identify judgment liens, tax liens, HOA liens, mechanic liens
- Determine lien priority
- Prepare for curative work on any cloud on title
New Financing Terms
- Prepare promissory note and deed of trust
- Set interest rate, amortization, balloon terms
- Document late charges, default provisions, acceleration
- Consider lien position and subordination
Compliance and Disclosures
- Review applicable federal and state disclosure requirements
- Determine whether RMLO or other licensing applies
- Check truth-in-lending and applicable regulatory requirements
Servicing
- Decide on a professional servicer before closing
- Document payment collection and disbursement procedures
- Set up tax and insurance escrows if applicable
Insurance and Taxes
- Confirm property insurance is in place with correct named insureds
- Check property tax status and proration
- Determine who pays taxes during the term
After Closing
- Verify recording of deed and security instruments
- Confirm title insurance issuance
- Begin servicing and payment collection
- File any required periodic reports or tax documents
One Final Question
Can every party explain the transaction in plain English? If not, revisit the structure before closing.
Download This Checklist
This checklist is available as a downloadable PDF. Contact 1st Option Title to request the downloadable version. Not intended as legal advice. Consult qualified professionals for transaction-specific guidance.