Originally Posted by CHRIS1u
I see many dire warnings of the horrible risks involved in a sale by owner. Indeed, there are many things that can go wrong, but if the details are attended to, that need not be the case. A menu of those details:
1. If you still owe on your own financing, you have a show stopper. The re-sale is probably a violation of the existing financing agreement, and the fact that the title is held by the first lender makes it virtually impossible to protect yourself. But, if you have a clear title..
2. Make sure you reach agreement as to the terms of sale...is it as is, are there defects to be disclosed, what will be the payment obligation, interest, etc. It should be clear that the seller will be protected by a security agreement and title endorsement, with the usual protective language.
3. In order to create a valid lien on the vehicle, the buyer must sign a security agreement, which will state that the seller has a security interest, which will be perfected by endorsement on the title. There should be provisions relating to default, repossession in the event of default, etc. The buyer should be required to provide insurance, preserve and protect the vehicle, keep it maintained and repaired. The policy of insurance should include collision and comprehensive coverage, naming the seller as loss payee, with a provisions that the seller will be notified in the event the policy is expired or otherwise terminated. There are even some printed forms which address these issues.
4. There is no liability to third parties if there is an accident, if the vehicle has really been sold and registered in the buyer.
5. Typically, the title is sent to the lien holder (seller) and the registration is sent to the purchaser, as owner (subject of course to seller's lien).
6. There is always the risk, as with any kind of vehicle or personal property financing, that the buyer will take the vehicle off into the sunset, to parts unknown, contract be damned. For that reason vetting the buyer as a responsible and credit worthy person is as important as the documentation.
All this is a mouthful...but a lawyer can handle it all if the seller feels overwhelmed by the necessary details.
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