Main Content

CONTRACT FOR DEED SERVICES

Selling a home on a Contract for deed in Minnesota.

If you are thinking of offering contract for deed financing to sell your house you came to the right place. As you know of by searching Google & Yahoo-Bing and other search places we show up and a top place to buy or sell properties with Owner financing. 

Thats because we specialize in Contract for deed Properties. I have been in business for over 22 years.

I work with contract for deed homes daily. You will find your home listed on Minnesota’s top contract for deed web sites.  

“Call us today to get a free market analysis”

Seller-financed deals can be a great way to buy and sell all types real estate. The advantages for the buyer and the seller are many.  At BoardWalk Premier Realty we understand contract for deed deals and have been doing cd transactions for over 23 years.

If the property is owned free-and-clear or has underlying financing, We can help both the buyers and seller make competent decisions and guide them thru the process.  

BoardWalk Premier Realty  we work with attorneys and title companies for the seller and buyer to ensure a we help make the transaction as smooth as possible. We also provide guidance in structuring the deal so all parties are protected and verification processes are agreed and established to avoid future problems.

The title of the property will be searched thru a title company or law office to make sure there are no lien’s -assessments or any encumbrance to the property.

SEARCH FOR MINNESOTA CONTRACT FOR DEED HOMES IN THE FOLLOWING COUNTIES BELOW.

These are the largest Counties in Minnesota that We work in.

“Find 100s of Contract for deed homes for sale daily”

 

Sometimes Utilizing IRA investments account with a  contract for deed can very beneficial tool.

 

Contact BoardWalk Premier Realty for Contract for deed listings.

For more information on contract for deed and listings to view.

mnhomescontractfordeed.com

mnownerfinancedhomes.com

minnesotahomescontractfordeed.com

Steve Vennemann

651-334-8312

Broker with over 22 years experience

 

commerce.state.mn.us/UCB/30.1.1.pdf

 

Free Minnesota Contract for deed purchase agreement addendums

MNAR – Addendum to Purchase Agreement_ Contract for Deed Financing (Rev. 08-2

Free Minnesota form needed for all Contract for deed purchase agreements.

MNAR – Important Information About Contracts for Deed – 08_14

 

HOW DOES A CONTRACT FOR DEED WORK?

A contract for deed is an alternative financing agreement in which the seller finances the sale of the property rather than a lender.

No Mortgage Registration Tax (MRT) is due on the recording of a contract for deed because a contract for deed is exempted under the MRT law.  View the law, Minnesota Statutes, Chapter 287.04 subdivision(d).

Deed following Contract for Deed

Deed Tax is due on the conveyance of legal ownership of real property with a deed following the satisfactory completion of the terms of a contract for deed. The deed that conveys legal ownership of the property from the grantor to the grantee is taxable.

The basis of the Deed Tax is the total consideration for the conveyance. In most cases, the total consideration is equal to the principal amount of the purchase price agreed upon at the time of the sale.

Note: The basis of the Deed Tax does not include the interest charged and paid as part of the installment payments under the contract agreement.

Completion of Contract for Deed

Example

(A) Joe sells real property to Sue for $ 200,000 on a contract for deed.

Terms:   $    25,000 down payment

$ 175,000 ($ 1,942 monthly for 120 months)

When the contract is “paid in full” and Joe provides a warranty deed to Sue.  Deed Tax is due on the $ 200,000 purchase price.

Assignment of grantor’s (vendor’s) interest with warranty or quit claim deed

Under a contract for deed, the grantor retains the legal title to the real property until the purchase price is paid in full and the other terms of the contract are completed.

Before a contract is paid off, the grantor (vendor) may choose to assign its contract rights to a third party.

Assignment of a grantor’s right to receive the payments is exempt from Deed Tax because no real property is conveyed. However, if the grantor issues a deed to the property along with the assignment, the conveyance document is subject to tax. Tax is based on the price paid for the assignment less the current contract for deed principal balance.

Example 

Joe sells real property to Sue – Contract for Deed $ 200,000.

(A) Joe sells his vendor’s interest to tom for $ 100,000. The remaining principal balance on the contract for deed is $ 94,000.

Deed Tax Due: $ 19.801 ($ 100,000 – $ 94,000 = $ 6,000)

(B) Joe sells his vendor’s interest to Tom for $ 94,000. The remaining principal balance on the contract for deed is $ 100,000.

Deed Tax Due: $ 1.65($ 94,000 – $ 100,000 = $ – 6,000)

Note: When the contract is “paid in full” and Sue receives a warranty deed from Aaron, the Deed Tax due is $ 660.00 (based on $ 200,000 Contract for Deed Price).

 1Tax Rate .0033, additional .0001 in Hennepin and Ramsey County.
2 When consideration is $ 500 or less, the tax is $ 1.65.

Assignment of grantee’s (vendee’s) interest with warranty or quit claim deed

Under a contract for deed, the grantee (vendee) generally has the legal right to possess and use the property during the course of the contract and to receive legal title to the property when the terms of the contract are completed.

The assignment of a grantee’s interest in a contract for deed is exempt from the deed tax if the only thing conveyed is the right to make the payments and occupy the property during the term of the contract. However, if the grantee issues a deed to the property along with the assignment, the conveyance document is subject to the Deed Tax. Tax is based on the price paid for the assignment less the current contract for deed principal balance.

Deed Tax on assignment of vendee’s interest accompanied by a deed

Example

Joel sells real property to Sue – Contract for Deed $ 200,000.

(A) Sue sells her vendee’s interest to sam for $ 225,000 (i.e., purchase price).  sam pays part of the purchase price by assuming the balance on the contract for deed of $ 75,000.

Deed Tax Due: $ 495.001 ($ 225,000 – $ 75,000 = $ 150,000)

(B) Sue sells her vendee’s interest to Sam for $ 175,000 (i.e., purchase price).  Sam pays the entire purchase price by assuming the balance on the contract for deed of $ 175,000.

Deed Tax Due: $ 1.652 ($ 175,000 – $ 175,000 = 0)

Note: When the contract is “paid in full” and Sam receives a warranty deed from Joe Deed Tax due is $ 660.00 (based on $200,000 Contract for Deed Price).

Tax Rate .0033, additional .0001 in Hennepin and Ramsey County.
 When consideration is $ 500 or less, the tax is $ 1.65.

Cancellation of contract for deed

No Deed Tax is due on the cancellation of a contract for deed. It is included as an exception to the tax under M.S. 287.22, Clause (1). The result of the cancellation is that the grantor retains legal ownership of the property.

 

“Contract for deed Important Tips”

Here are some important tips if you are considering buying a home with a contract for deed.

Apply for a conventional mortgage

We recommend buyers should first try to qualify for a conventional mortgage loan from a bank, credit union or other licensed mortgage lender. It will include more consumer protections and likely cost you less. Rates will be lower and most of the time less of a down payment.

Get advice

A contract for deed is a complex arrangement with many legal and financial risks. Consult a certified housing counselor or BoardWalk Premier Realty so you understand the pros and cons of a contract for deed in your situation.

Get an independent appraisal and a professional inspection

An appraisal will tell you how much the property is worth so you do not overpay. An inspection will tell you about the property’s condition and what repairs are needed. Also check with the local housing inspection office about any reported code violations that require repairs. Some cities make the sellers do a truth n housing inspection which tells you some conditions of the property.

Make sure you understand the contract and your financial responsibilities

Review the monthly payment, property tax, insurance and maintenance/repair requirements you are accepting. What interest rate are you paying? How much is the balloon payment and when is it due? What are the terms under which the seller can cancel the contract and evict you? Minnesota law states the seller can’t cancel the contract till 60 days. Seek legal advice on this.

Research the property title

Make sure the seller really owns the property. You risk losing the home and everything you have paid if it has a mortgage and goes into foreclosure. Check with a title agent or the county property office to find out if there is a mortgage or other liens on the property. A title company can also ensure the contract is properly recorded with the county, as required by state law. This will also help prove your possession of the property and protect you from post-contract encumbrances placed on the property by the seller.

What do I need to know about Contract for deeds?

What You Need to Know

Here are some important considerations you should know about before buying a home on a contract for deed.

Full costs?

Make sure you understand and can handle all of the costs you will be responsible for. From monthly installment payments to the seller, you will have to pay for homeowners insurance, property taxes and repair and maintenance costs as specified in the contract for deed. 

Balloon payment

As in a standard mortgage, a contract for deed  has an agreed-upon price and payment schedule. But the payments are often not amortized evenly over a long period, meaning you will likely be required to make a large lump-sum “balloon payment” at a specific date to complete the purchase by covering the full balance due on the sale price. At that time, you will need to get a mortgage for the balloon payment or ask the seller to restructure the contract for deed or sell the property. If you are unable to qualify for a mortgage or otherwise make the balloon payment when it is due, you will likely face cancellation of the contract and eviction.

Cancellation and eviction

If you miss just a payment, or cannot make the balloon payment or do not fulfill any other provisions in the contract for deed, the seller can cancel the contract and begin an eviction action against you in 60 days. You could lose the home and all the money you have already paid toward ownership of it if you don’t catch up the payments and most likely late fees and possibly attorney costs and court fees if it goes that far.

Recording the contract for deed

Within four months of signing the contract for deed, you must “record” it with the office of the county recorder or registrar of titles in the county in which the property is located. If you do not do so, you will face a fine. Recording the contract will also help prove your possession of the property and protect you from post-contract encumbrances placed on the property by the seller. I cant stress enough to do the closing with a title company or law office where the deed will get recorded for you.

How long does a contract for deed last?

Typically, it runs from three to five years. The property’s title remains with the seller until the full sale price gets paid; a balloon payment at the contract’s end is standard.

Is a contract for deed a sale?

A contract for deed, also known as a “bond for deed,” “land contract,” or “installment land contract,” is a transaction in which the seller finances the sale of his or her own property. In a contract for deed sale, the buyer agrees to pay the purchase price of the property in monthly installments.

Does a contract for deed need to be notarized?

Minnesota requires that a contract for deed be in writing, but this kind of agreement must be filed with the county, so it is essential that the contract be notarized to protect both parties.

How do I report a contract for deed on taxes?

Generally, contract for deed sellers use IRS Form 6252 to report installment sales in the year in which they take place. You also use Form 6252 during each year you receive income from your contract for deed. Attach Form 6252 to your Form 1040 and Schedule D, “Capital Gains and Losses.”

Can you claim a contract for deed on your taxes?

The IRS does allow you to deduct the interest portion of the payments you make under a contract for deed from your income taxes if you itemize deductions. You can also deduct any real estate taxes you pay, just as with a mortgage.

Who pays taxes on contract for deed?

In a typical Minnesota contract for deed, the buyer becomes responsible for the obligations of a mortgagor in possession, such as maintaining the property and paying property taxes and casualty insurance. Also unless prohibited by the contract, either party may sell his or her interest in the contract.

What does contract for deed mean?

A Minnesota Contract for Deed is a tool that can allow buyers who either don’t qualify for traditional lending options or who want a faster financing option to purchase property. … The seller retains legal title to the property until the balance is paid; the buyer gets legal title to the property once the final payment is made.

Can I refinance a contract for deed?

In most cases buyers may be able to refinance the contract for deed, though you’ll need to work with a mortgage lender. In a contract for deed refinance, the seller currently providing your financing sells you the home and you use a new mortgage loan to purchase it and gain legal ownership.

Is there interest on a contract for deed?

A contract for deed is basically a formal agreement for buying a property/land without going to a traditional mortgage lender. … upon clearing all the agreed upon payments, the deed is turned over to the buyer by the seller. The interest rates can be negotiated but typically a Minnesota Contract for deed/land contract is around 6-7% interest amortized over 30 years.

Do you pay capital gains on a land contract?

Seller Tax Consequences. … As an installment sale, the seller pays any capital gains taxes over the contract’s length, not all at once. Also, interest income earned by sellers in land contract sales is taxed at ordinary income rates. Talk to a tax accountant on this matter.

What does Bond for Deed mean?

A bond for deed is a contract to sell real property in which the purchase price is to be paid by the buyer to the seller in installments and in which the seller, after payment of a stipulated sum, agrees to deliver title to the buyer. It may also be called a “contract for deed“.

Is rent to own the same as contract for deed?

Lease option/ rent-to-own, is a lease on the property with the option to purchase the property at the end or during the lease agreement. … A contract for deed is an actual purchase of a property where the seller essentially holds the financing. A purchase agreement is executed and a closing takes place with in usually 7-60 days after purchase agreement is accepted.

How much is a downpayment on a contract for deed?

Sellers usually want 10% to 20% down of the sale price of the property to entertain a contract for deed in Minnesota or Wisconsin.

Is a land contract an installment sale?

A land contract, or contract for deed, is a type of installment sale in which a seller agrees to sell the property to a buyer over a period of time. During that time, the buyer makes installment payments which consist of both principal and interest.

What is a purchase money Agreement?

A purchase money security interest (PMSI) is a security interest or claim on property that enables a lender who provides financing for the acquisition of goods or equipment to obtain priority ranking ahead of other secured creditors. Some sellers will offer purchase money mortgages when selling a property on a contract for deed/land contract.

Are there closing costs associated with owner financing?

When buying a home with owner financing the purchase process is significantly easier and less expensive. Though you won’t need to pay many of the closing costs associated with a traditional mortgage, such as origination fees and points, you can still expect a few closing costs . Expect to pay around $1200 on a sale of $200,000 this does not include title insurance which I recommend purchasing.

Do you need good credit for owner financing?

Owner financing does not require Good credit However, you will typically see sellers who are offering owner financing also asking for a credit report and a large down payment and possibly a tax return or a 1099 or pay stubs to show employment.

Is it a good idea to do rent to own?

For a Mortgage you must have a good credit score and cash for a down payment. Without these, the traditional route to homeownership may not be an option. There is an alternative, Called a rent-to-own agreement, in which you rent a home for a certain amount of time, with the option to buy it before the lease expires.

 

How do I protect myself from rent to own?

  1. Speak with a Real Estate Agent/Broker
  2. Research the seller
  3. Research the property by call the county the property is located in.
  4. Be sure you can afford the rent before you sign the agreement.
  5. Double check your lease-option agreement.
  6. Start fixing your credit right away. credit karma.com offers free credit reports.
  7. Secure your deposit and rent credit in escrow.
  8. Always Pay the rent on time
  9. Make improvements to the property only after you’ve decided for sure that you want to buy it and will qualify for a loan.
  10. Be cautious about all of this. Clear all possible home-buying hurdles before the lease comes to an end.

What are the benefits of rent to own?

The benefits to the buyer of renting to own is home ownership also others including tax deductions, building equity when you purchase the house.  If you don’t have the means to put a down payment on a home right now, but you want your rent payment to actually go toward an investment, renting to own is an excellent option. Sellers will want some money down but it’s less than a contract for deed in Minnesota and Wisconsin. Typically 5% down verses 10-20% for a contract for deed.

What is the HOPE program?

Homeownership can be one key to self-sufficiency for low-income families, building assets for families and stability and pride for neighborhoods. Through HOPE I and other programs, HUD is working to make homeownership possible for thousands of families now living in public housing.

hud.gov/programdescription/hope1

How does a lease option to buy work?

A lease option works much the same way. The buyer pays the seller option money for the right to later purchase the property.The buyer agrees to lease the property from the seller for a predetermined rental amount during the term of the lease option agreement.

How do you negotiate a lease with option to buy?

  1. Negotiate the purchase price. Your contract will need to identify how much you will pay if you choose to buy the house after the lease period.
  2. Pay for the option. How much?
  3. Determine the length of your lease.
  4. Negotiate your monthly rent.
  5. Who pays for maintenance ?
  6. Review your contract with BoardWalk Premier Realty

What is a Note?

A note is a legal document that serves as an IOU from a borrower to a creditor. Notes typically obligate the issuer to repay its creditor the principal loan and any interest payments on a predetermined date.

What is the difference between a mortgage and a note?

The promissory note that contains the promise to repay the amount borrowed. While a promissory note is basically an IOU that contains the promise to repay the loan, the mortgage or deed of trust is the document that pledges the property as security for the loan.

MN Rent to Own details-important tips

  • Make sure the contract is in writing! No verbals.  Don’t agree to anything that is not written down. Minnesota law will not enforce agreements to buy or sell real estate unless its in writing!
  •   Make sure the agreement satates what part of your payments are rent and what part go toward the purchase.
  •   Make sure the agreement says when the actual sale will be, and what the terms are. It should say if the sale will be by a contract for deed, a purchase money mortgage or a mortgage thru a lender. If you need a mortgage, talk to a bank to see the time line you need to get a mortgage so you have enough time to do a Rent to own or Contract for deed.
  •  Make sure the seller really owns the home. Contact the county the property is in and make sure the seller is the owner or call a title company to do it for you.
  •   If there is a mortgage on the property Make sure the purchase price will be enough for the seller to pay off the mortgage. If the mortgage is not paid you can end up losing the home.
  •   Most rent-to-own agreements say that you have to make a down payment when you sign. If you don’t perform on the purchase the renter will most likely not receive that money back.
  •   Watch out for scams. Some landlords do not really want to sell the home. They use rent to own agreements to get more money from tenants or to get tenants to do work on the home. Make sure you read the agreement carefully before you sign.

 

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.

Seller Benefits 

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.

  1. Sellers can cash flow the property in which most cases it better than the stock market or bank account interests.
  2. Quick closing.
  3. More buyers
  4. Better pricing on the property.
  5. 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.

Buyer Advantages

  1. 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 

  1. 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.
  2. 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.

 

Steve Vennemann

Broker

Saint Paul Contract for deed homes for sale.

View Minneapolis Contract for deed homes today!