Check my website.
A misconception is that the seller has to carry the Contract for Deed.
There are many investors; self directed IRAâ€™s to name one, that will purchase the â€œpaperâ€ from the seller at the time of sale.
In my State, Minnesota, it has been common practice for decades.
This is a great way to help the housing market and the investor participation provides nice returns on their investments
Actually, most such transactions are put through a "holding company" ( Similar to an escrow.) where the buyer makes them the monthly payment, and the holding company disburses payments to the lender(s), taxes, and to the seller.
If the lender questions the holding company, they would usually say that the owner/seller has made the property into a rental, and that they are the owner's "property management company".
So, it CAN be a reasonably safe and viable transaction - it just needs to have an attorney give his or her blessing on it. We did such transactions a lot in the 70's, and they seem to be coming back, again.
Nothing to be afraid of - just careful.
Pros: You don't qualify with the bank to take over the loan.
Cons: If the underlying lender learns that someone other than the borrower who initially qualified for the loan is no longer living in the house & isn't the one making payments, they can immediately CALL THE LOAN all due & payable.
In my experience, what raises the red flag to the lender is if you set up a 3rd party co. & now that's where the payments are coming from & suddenly Not from Mr. & Mrs. Smith. It appears to the bank that the property has sold when they know it hasn't.
In this economy, however, I personally feel that if the bank is still getting payments, I don't think they'll care who the payments are coming from, so long as they're getting paid.
The object behind the contract for deed or Contract of Sale or AITD method is to get into a house you love, but then work on fixing your credit & qualifying for your own mortgage so you can refinance out of this in under 2yrs.
Realtor Since 1996
Assuming you are talking about a contract of sale, and this is a way to buy property when you don't have the credit to get a loan, but it's dangerous for the buyer as you do not get title to the property until it's paid off. Discuss with a real estate attorney and CPA to get all the implications before buying. This is usually a much better deal for the seller.
Lance King/Owner-Managing Broker
Lynn911 Dallas Realtor & Consultant, Loan Officer, Credit Repair Advisor
The Michael Group - Dallas Business Journal Top Ranked Realtors
Your words, though, leave things up to misinterpretation, so you might try to clarify them.