Home Selling in 55110>Question Details

Linda Burke, Home Seller in White Bear Lake, MN

I'm thinking of offering Contract for Deed when I sell. How do you know what interest rate to use?

Asked by Linda Burke, White Bear Lake, MN Tue Sep 30, 2008

Help the community by answering this question:


Well first off, do you have SIGNIFICANT equity in your house? Most sellers I see offering CDs have little to zero equity, which makes me wonder how they think they can sell their house.

You may know all this, but most don't so I'll use it as a learning opportunity for the rest:

A Contract for Deed gives the Buyer legal rights to the property beyond "rent to own" or simply renting. A CD is similar to a mortgage in many respects. There are differences but I don't want to go through all the nuances.

The biggest thing is that if you have a current mortgage, selling your home as Contract for Deed typically causes the "due on sale" clause of your mortgage to come due, which allows the mortgage company to demand immediate payment in full.... OUCH!

Buyers are nervouse buying a CD on a house with an existing mortgage since if the seller doesn't pay their mortgage, the new buyer could wind up losing the house when the bank (which is in 1st lien position) forecloses on the house... also an OUCH.

If you are "free and clear" on the house, then to answer your question, the rate is largely dependent on terms such as down payment, length of contract, credit history of the borrower, purchase price, etc. 1% or more above market rate is not unreasonable in many circumstances.
Web Reference: http://www.AaronSOLD.com
1 vote Thank Flag Link Tue Sep 30, 2008
I would sell your home on a cd verses renting here is why when you sell it the buyer is responsible for the repairs-taxes up keep- you get a large amount down in case they don't pay. renting the renter wrecks your home you still have to evict the tenant and nothing to show for it.
http://www.mnhomescontractfordeed.com for more buying or selling cd information
0 votes Thank Flag Link Sun Nov 17, 2013
selling your home on a contract for deed is a great way to go. Fo more information contract for deed financing and listings go here. http://www.mnlakeplace.com
0 votes Thank Flag Link Sun Nov 17, 2013
the lower the rate usually the more people who will be willing to buy the home 6% is pretty good.
0 votes Thank Flag Link Sun Nov 17, 2013
On average, I see sellers charging anywhere between 5-7.5% interest. Make sure you dont charge more than usury limit, which is set at 8% in the state of MN.
0 votes Thank Flag Link Sun Nov 17, 2013
If you need to sell . Offer cd terms as long as it makes sense to you and makes your mortgage payments. Just remember is you have a due on sale clause in your mortgage they usually dont call it due especially in this market. I would say 6% interest would be fare in this market. steve vennemann 651-334-8312 boardwalk premier realty inc.
Web Reference: http://www.mnlakeplace.com
0 votes Thank Flag Link Mon Feb 16, 2009
There are caps to the interest rate you can charge and I believe you can find that out through the department of commerce. In my experience buyers on a CD are willing to take a 2-3% higher interest rate than the current market. Hope that helps.
Web Reference: http://www.lennyfrolov.com
0 votes Thank Flag Link Tue Sep 30, 2008
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