The Seller Financing Addendum (TREC No. 26-8) is dated 11-07-2022 on the form and replaces TREC No. 26-7. It's the form that applies when the seller — not a bank — is financing all or part of the purchase price, and it opens with a warning most of TREC's addenda don't carry this bluntly: "Agreements for Seller Financing can be complicated and may be subject to laws regulating loans. CONSULT AN ATTORNEY AND A FINANCIAL PROFESSIONAL BEFORE SIGNING. Seller may have accounting or reporting obligations concerning the Seller Financing."
Credit documentation and approval come first
Paragraph A requires the buyer to deliver credit documentation to the seller within a negotiated number of days after the Effective Date — the form's own checkboxes are a credit report, verification of employment/salary, verification of funds on deposit, a current financial statement, and an open "other" line. The buyer authorizes any credit reporting agency to furnish copies of the buyer's credit reports directly to the seller, at the buyer's expense.
Paragraph B gives the seller real discretion: if the credit documentation isn't delivered on time, the seller can terminate and keep the earnest money. If it is delivered and the seller determines, in the seller's sole discretion, that the buyer's credit is unacceptable, the seller can terminate within 7 days after the delivery deadline or actual delivery (whichever is later), and the earnest money goes back to the buyer. If the seller doesn't act within that window, the buyer's creditworthiness is deemed approved.
The promissory note terms are all on the form
Paragraph C sets up the note: principal amount, interest rate, and place of payment designated by the seller. Buyer may prepay in whole or in part at any time without penalty, with prepayments applied to the last-maturing principal installments. Two figures are fixed on the form itself rather than left blank: a late fee of 5% of any installment not paid within 10 days of the due date, and a matured unpaid amount interest rate of 18% per annum or the highest lawful rate, whichever is less. The note is structured one of three ways (check one): a single balloon payment with interest paid at maturity, monthly, or quarterly; monthly installments (including or plus interest) for a set number of months before a balloon; or an interest-only period followed by amortizing installments before a balloon.
The deed of trust — property transfers
Paragraph D(1) is the clause that controls what happens if the buyer tries to resell before the note is paid off, with two options (check one):
- Consent Not Required: the property may be sold, conveyed, or leased without the seller's consent, provided any subsequent buyer assumes the note.
- Consent Required: if the property is sold, conveyed, leased for longer than 3 years, leased with an option to purchase, or otherwise sold (including any contract for deed) without the seller's prior written consent — which the seller can withhold in the seller's sole discretion — the seller may accelerate the note. Carve-outs that don't trigger this: a subordinate lien, a conveyance under threat or order of condemnation, a deed solely between buyers, or a title passage by death or operation of law.
Casualty insurance and tax/insurance escrow
Paragraph D(2) requires the deed of trust to state whether the buyer shall or shall not obtain casualty insurance naming the seller as mortgagee/loss payee effective on closing. Paragraph D(3) offers two escrow structures: no escrow (buyer furnishes annual proof that taxes are paid and insurance is current), or required escrow (buyer deposits a pro rata share of estimated annual taxes and insurance with each installment, cures any deficiency within 30 days of notice, and the form specifies whether a third-party servicer will be used and who pays for it). Paragraph D(4) makes any default on a superior lien an automatic default under this deed of trust too.