Selling property on contract

Question

I'm selling a property on contract. We have a payment schedule set up, charging interest, fee's involved with the contact sale etc, etc. How would I go about setting that up in Quicken and recording payments?

Tom Young · Answer

* Some more detail as to how you have the property currently set up in Quicken would be useful, as would further details about the structure of the contract for sale, particularly the "fees" issue.  But assuming that the property is set up as some sort of asset on your balance sheet and the contract is structured as down payment/monthly payments of principal and interest and fees then let's work through an example:

* Asset on books with a balance of $125,000
* Sale of asset for $150,000
* Buyer pays $7,500 up front
* You finance the balance of $142,500 with 7% interest for a term of 20 years plus property tax escrow fees of $75 per month

Let's say immediately prior to the sale on 3/25 you have a super simple balance sheet with only 2 Account: a bank Account with $1,000 in it and as asset Account called Property with the $125.000 balance.  On the day before the sale you create another asset Account called Loan Receivable with $0 in it and another asset Account called Escrow, also with a $0 balance:

On the day of the sale you'd deposit the $7,500 down payment in the bank Account and split that deposit to remove the property, establish the loan amount, and enter the gain on sale.

So upon making this entry your balance sheet would look like this:

Then you'd step over to the new loan Account, click the gearwheel and select "Convert to a Lender Loan", entering the loan balance, interest rate, term, etc.  The $75 extra for monthly escrow would also be established, going to the Escrow asset as remitted.

Frankx · Answer

Hi @ Pirate10,

From the information provided your above post it sounds like you sold real estate and effectively took back a mortgage loan as part of the sale.

At a very high-level, the only difference between recording your sales transaction and one where you did not take back a mortgage from the buyer is that you will need to set up an "asset" account in Quicken for the "mortgage receivable".

Then, as payments are made to you, you will need to break down those payments into parts.  Those parts will include: the "principal" amount - which will reduce the "mortgage receivable", and the interest paid amount - which is "interest income" to you.  I am not exactly sure which "fees" you are referring to, but I suspect that they are connected to the transaction (like legal fees, recording fees, etc.).  It is likely that those will end up being additional income or expenses related to the sale that will affect the computation of profit, or loss, on the sale.

Hope this helps.

Frankx