Is a contract for deed a good way to buy/sell a house?

Asked by Bill, Palm Beach Gardens, FL Thu Apr 14, 2011

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King Of Contact For Deeds’ answer
King Of Cont…, , Minneapolis, MN
Fri Jun 3, 2011
With the conditions of the financial markets, it is the best options for many home buyers and sellers.
A misconception is that the seller has to carry the Contract for Deed.
There are many investors; self directed IRA’s to name one, that will purchase the “paper” 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
0 votes
Paul Youssef, Agent, Irvine, CA
Mon Nov 17, 2014
I specialize in seller financing but we do not use the "contract for deed" or land contract method, mainly because of the risks the buyer assumes. We don't even use the AITD method, but the Trust method. It's usually recommended to protect the buyer and avoid due on sale.

Check my website.
0 votes
Steve Vennem…, , Maplewood, MN
Tue Nov 12, 2013
yes a great way less closing costs-no mortgage insurance-credit does not have to be good.

http://www.nationwidecontractfordeeds.com
0 votes
Bob Phillips, Agent, Rancho Santa Margarita, CA
Thu Apr 14, 2011
Emily mentioned: "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."

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.
Web Reference:  http://BobPhillips.net
0 votes
I believe your Red Flage would applies to the seller have not paid off the house.
Flag Mon Dec 10, 2012
Emily Knell, Agent, Huntington Beach, CA
Thu Apr 14, 2011
There are pros & cons to a contract of sale.

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.

EmilyKnell1@yahoo.com
562-430-3053 cell
Realtor Since 1996
0 votes
Lance King, Agent, San Francisco, CA
Thu Apr 14, 2011
Bill,

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.

Best Regards,

Lance King/Owner-Managing Broker
lance@fixedrateproperties.com
415.722.5549
DRE# 01384425
0 votes
Dallas Texas, Agent, Dallas, TN
Thu Apr 14, 2011
Not knowing all the particulars difficult to render an opinion

Lynn911 Dallas Realtor & Consultant, Loan Officer, Credit Repair Advisor
The Michael Group - Dallas Business Journal Top Ranked Realtors
972-699-9111
http://www.lynn911.com
0 votes
Bob Phillips, Agent, Rancho Santa Margarita, CA
Thu Apr 14, 2011
Hi Bill. It sounds like you MIGHT be referring to a "contract of sale" which is a seldom used device for selling properties here in California. Depending on the circumstances, it CAN be useful, but you really should consult with an attorney, if that's what you're talking about.

Your words, though, leave things up to misinterpretation, so you might try to clarify them.
Web Reference:  http://BobPhillips.net
0 votes
Melissa Krch…, , Rancho Cucamonga, CA
Thu Apr 14, 2011
I'm not sure what you're asking. A Deed in Lieu is when the person simply gives the home back to the bank and they avoid foreclosure. Can you reply so that I can give you more information?
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