I will not tout myself as an expert, but I have done more contracts for deed than any other agent in my office and can tell you that so far I have successfully negotiated some great deals for my buyers with these contracts for deed. I have excellent attorneys at my disposal here and they have been VERY key and important in getting these done right. I have also been successful on a couple of occasions in getting some sellers to accept a contract for deed offer when they initially were not offering the property and actually told us NO when we asked if they were interested. I have a good system for running my queries and interacting with the prospective CD seller and it seems to work.
If you would like to discuss all of your options, want to run some number (renting vs. buyin on CD terms, etc., please feel free to give me a call.
1) Craigslist- FSBO (For Sale By Owner) will post on Craigslist and offer CD financing many times even if it is not initially offered. You just need to know how to structure the deal.
2) The MLS- We have filters on our State-Wide database where I can custom a search specifically for only CD properties, and you get notified instantly. Between Craigslist and the MLS you should catch almost all CD listed properties.
The problem, and always will be, is INVENTORY. Contract for Deed listings account for less than 5% of all home sales...that does not give you very many options.
So a 3rd way is I created my own program where you can now buy any property off the MLS; not just the stuff that is already advertised. That allows my CD clients to access the 95% of inventory they previously could not buy. All you have to do is contact me for more info.
As to your second question it is quite easy. You compare rent to a mortgage payment first and see which will be more expensive. You then review the market and make some decisions on where we are heading. If you believe prices will go down probably not a good time...but if you think prices will go up than it is a great time to buy. Like others have said the balloon payment is a refinance scenario not a purchase. You get equity in home-ownership versus nothing in renting. You do also get the MID deduction as long as you keep good records, so there is a tax benefit as well.
I also see you went through foreclosure maybe July 2011. There is a new FHA program where you can buy in 2 years if you meet some qualifications instead of the typical 3. It just came out this fall, so if you want to try traditional financing we can attempt that first.
There are risks too. Will you be able to refinance when the contract for deed becomes due and payable in full?What will the interest rate be then? Would the seller be interested in extending the contract for deed if the interest rates are high then? If I default, I only have a short time to make up the payments.
Sometimes a contract for deed is the only option for a buyer to purchase and the benefits out weigh the risks.
Hope that helps.
- If there is an underlying mortgage, there is likely a due on sale clause. That means once the CD is recorded, the mortgage company will have the right to foreclose immediately (No Mr. Nice Guy). I speak from experience.
- If you don't record the contract, it becomes difficult to enforce certain elements of it. This could mean loss of the downpayment, or other unpleasant issues.
- Good legal advise is more important for a CD than with a purchase or lease. Most purchase agreements use standard forms that have be reviewed & updated ad nauseum. Rental agreements are designed for flexibility. CD's are too often drafted by amateurs. You want this handled professionally for a well understood, well crafted agreement.
- Operate with a "worst case scenario" mentality. Understand your risk tolerance & get great 3rd party opinions. You can do really well, as long as you are making educated decisions.
The MLS allows us to search for properties that are for sale with a contract for deed as an option. For example there are 7 properties for sale right now in 55447 where the seller would accept a contract for deed in the sale of the property. Let me know if you would like me to send you a list of those properties.
Coldwell Banker Burnet
licensed MN Broker