Is Contract for deed the right option for Me?
We specialize alternative financing purchases for all types of properties.
A contract for deed is an alternative financing agreement in which the seller finances the sale of the property rather than a Bank. Buying a home with a contract for deed, the homebuyer agrees to pay the seller the purchase price over time with interest in monthly installments also in the agreement the buyer will pay taxes and insurance. Sometimes its escrowed other times the buyer pays them directly to the county and their insurance company.
Contract for deed terms vary between each seller .Some may include principal and interest, interest only and amortization periods that are negotiated between buyer and seller, typically about 3-5 years, but rarely for terms of 10 years or more.
Contract for deed agreements usually include a lump-sum balloon payment, with the full amount due within several years after the purchase of the property. Balloon payments require the buyer to pay the full remaining amount due, for which the buyer may need a mortgage loan or the buyer may sell the property. The homebuyer pays all the payments called for under the contract, the seller is obligated to give the homebuyer a deed to the property. A contract for deed arrangement is not the same as Rent to Own agreements which allow either party to terminate the agreement without the potential for great financial loss by the renter.
Contract for deed agreements are attractive to home sellers because they open up the market to more buyers who, for a number of reasons, can- not find a mortgage-ready buyer to purchase the property.
Sellers can cash flow the property in which most cases it better than the stock market or bank account interests.
Better pricing on the property.
Some properties need repairs for FHA-VA financing and the seller does not have to fix those items.
Easy to cancel the contract. In the case of default by the buyer, the law allows the seller to cancel the contract without a fore- closure sale or judicial action, reclaim the property within 60 days, and retain any payments made by the buyer.
A contract for deed gives buyers time to repair their credit, which may allow them to qualify for a mortgage loan later on.
Homesteading. Purchasing a home by contract for deed gives the buyer the right to homestead and take advantage of certain Property tax benefits such as the market value exclusion and be- ing eligible to apply for the property tax refund.
3. Mortgage interest deduction. As the legal owner, the buyer can claim Contract for deed/mortgage interest deductions and real estate tax on their personal income taxes. Since contracts for deed typically do not require the seller to provide a year-end statement of interest paid, buyers should keep records of their payments.
4. Less Regulations on financing standards. The sellers do their own underwriting and they’re standards will have a lot less regulations than mortgage loan. Usually the sellers will want a credit report or proof of income.
5. Lower Closing costs. There are no origination fees, points, formal loan applications or high closing costs with a contract for deed. Even if closed by a title company, which is recommended, the costs are much lower than for a mortgage.
6. Home ownership. Structured properly with the right cd terms that the buyer can afford, a contract for deed can be a viable path to home ownership for those with credit challenges.
Disadvantages of a Contract for deed
Contract for deeds have a balloon payment. If the buyer is unable to get a loan at the time the balloon payment is due, the seller has the right to cancel the contract with a 60-day notice, take possession of the property and keep any downpayment or other payments to date and any equity that may have accrued.
Lacks the protection offered under Minnesota foreclosure laws. If the buyer fails to make a payment or is in default on other conditions of the contract, the seller can cancel the contract and reclaim the property without a foreclosure sale or judicial action.
3. Seller retains title to the property. Protect your self by recording the contract for deed with the county re- corder immediately after the contract is executed.
4. The seller has the unrestricted right to sell his or her interest in the contract. The buyer is typically prohibited from selling their interest in the contract without the seller’s consent.
5. Ineligibility for most first-time homebuyer programs since contract for deed is a form of ownership.
6. Repair and maintenance issues. The buyer is responsible for property repair and maintenance.
7. Property taxes and Insurance. The buyer is responsible for paying property taxes and for obtaining adequate insurance.
Ensure the interest rate does not exceed the maximum allowed by law by calling the Department of Commerce at 651-297-7053 to get a recorded message for the current month’s maximum rate.
Purchase title insurance
The title company will search for any outstanding mortgage or mechanics liens and if they close the loan will ensure the contract is properly recorded. If there are any issues, the title company will alert you to them and will let you know what items need to be remedied.
Work with an experienced REALTOR® BoardWalk Premier Realty
People who you can trust as your buyer’s agent.We will look out for your interests and negotiate on your behalf. Our agents are able to assist you with executing the purchase agreement and contract for deed addendum, preparing a market analysis, negotiating a purchase price, contract terms and repair items, setting up the closing and ordering the title work and much more!
We will find out the terms the sellers are requesting to enter into a contract for deed prior to showing the property to any potential buyer. We want to save the buyer and our selves time if the terms do not work out for them.
If is important to know if you can afford the home or want to even do the cd terms before viewing the property.
If we choose to work with you and sell your property we advertise on Zillow.com,Realtor.com, Facebook market place and 1000s of more real estate web sites.
For the quickest way to be approved to buy a home on a contract for deed is click this link.