What is the due on sale clause and how are both parties protected?
The due on sale clause was put in place to protect the mortgage lending industry. It gives the bank the right, but not the obligation, to call the note for any reason—including the sale of the property. While this is the biggest risk to both parties in any owner finance transaction, we consider it to be a very unlikely one and have only heard of this taking place one time within the past 25 years. The banking industry is in the business of making money by lending money; they are not in the business of holding real estate.
