Here is a list of risks you COULD run into
Homes sold through this method often do not involve a provision for a home inspection. I highly recommend any home you consider investing in you have inspected for possible major and expensive defects.
If the seller has an existing mortgage/deed of trust on the property, the mortgage document will almost certainly have a â€œdue on saleâ€ clause that will be triggered by a contract for deed.Â This means that, unless the lender consents to the contract for deed, the lender can declare the entire loan to be due immediately.Â If you are not in a position to pay off the balance of the loan, the property could be foreclosed right out from under you, and youâ€™d have little or no recourse.
Another risk is that you do everything you are supposed to, and upon making the final payment, you discover that the seller is unable to deliver clean title to you (or any title). For example, there may be liens on the property from the sellerâ€™s creditors. Or perhaps the seller divorces or dies, and various other parties claim ownership. These are all problems that could require expensive litigation to sort out.
It is very unlikely that a buyer will be able to get title insurance on the property, at least not until title is conveyed.
The buyer has no equity in the home until it is fully paid off. This means that even if you make payments religiously and on time for several years, but if you fall on hard times and fail to make a couple of payments, you could lose the house and all of the money you paid to the buyer.
Lastly you will not have the tax benefits of owning a home.
I am not an attorney so again I encourage you to seek legal counsel if you want to get into this kind of situation. Best of luck.
Ericka Lalka, CSP
Managing Broker, REALTORÂ®
The Lalka Group
RE/MAX First Advantage
636 N. Colorado Street
Kennewick, WA 99336
Office: (509) 736-3344 x 356
Fax: (509) 735-9755
Ericka's Cell: (509) 539-5535
A pond was installed in the back yard against the brick wall which caused the brick fence to fail. The pond also leaked which caused soil erosion an untrained eye would never see.
A bid to repair the wall was made by the same company who failed to construct the wall correctly. The bid was about $6,000 which seemed low. Two additional bids put the price near $12,000 and that did not include the cost to get rid of all the soil that had to be excavated for the â€œEngineered Retaining Wallâ€. When I spoke to my insurance company about issues if the wall failed after I bought the home, Farmers Ins. Said it would be a â€œManufacturers Defectâ€ and would not be covered for repair.
Always get a home inspection. There were other issues found such as landscaping near home needs to be removed because it causes water to run toward the home. And it was such a beautiful home too in Kennewick. Just like the movie â€œThe Money Pitâ€.
Good luck, Jirius Isaac
Yes, but if you want the loan in your name, so you get the credit, you'll need a new loan. Assumable loans are rare these days, if they exist at all. If you are taking over payments for someone else, they would get the credit and yours would not be affected positively or negatively.