Agreeing with Frank A., you most certainly can. There is nothing illegal about selling the property with an underlying note as the "due on sale" provision typically found in a conventional loan is a right but not an obligation granted to the lender. There are at least four different ways to handle this "due on sale" provision likely contained in the note. 1. In our business dealing with thousands of seller financed notes each year, we would first encourage you to notify the lender about the conveyance and ask for a waiver, 2. a second less optimal alternative would be to create a "wrap note", and utilize a [licensed] note servicing company to split your monthly payments so that a portion goes to the underlying debt holder and the balance to the [seller financed] note holder, 3. you could utilize a "contract for deed" and not actually convey title until all the payments on the newly created note are made (although we understand this may be interpreted as fraud in many states so like anything you should always consult with your attorney first), and 4. depending on the structure and other factors surrounding the utilization of seller financing and the creation of a new note, you might be able to raise sufficient capital through the sale of the note to retire the underlying debt. If the new note has been property structured, the credit worthiness of the buyer fully vetted, the loan properly documented to be fully-compliant with all federal and state guidelines, and the note serviced by a licensed servicing company, depending on the LTV and the amount of the downpayment, it is possible to raise enough money through the note sale to payoff the underlying debt and still retain some available equity. I would be happy to discuss these options further, as appropriate, but think you now have enough to go on.
May 12, 2010