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Contract for Deed: Some Basics

The real estate market is enjoying a very active market.  Homes are moving fast and buyers who not prepared to buy will miss out if they are not ready to act.  An ability and willingness for a buyer and seller to enter into a contract for deed can help a seller get more for their property and can help a buyer get into an equity ownership position. Fullscreen capture 462016 104649 AM.bmp

To the point, a contract for deed is a conveyance whereby the seller finances the purchase by the buyer.  Instead of the buyer paying the full purchase price up front, the buyer pays a percentage of the purchase price to the seller with the balance paid over time.  The conveyance is documented by a deed, akin to a "standard" transaction, but the deed also includes the terms of repayment, cancellation provisions, and other terms (both required and that may be agreed to by the buyer and seller.   The deed gets recorded at the county, and the deal is done...probably.

A contract carries risk for a seller.  The primary risk is the buyer stops paying.  Unlike the mortgage foreclosure process, the contract for deed cancellation is very prompt and effective.  A payment made 1 day late triggers the right to cancel the contract for deed. A properly initiated contract for deed cancellation can require payment by the buyer of penalties and attorney's fees.

For a buyer, there is less risk.  The primary risk is the buyer stops paying.  Yes, the same risk for buyer and seller is primary, but the downside for the buyer who fails to make payments is the likely loss of all the equity the buyer has built up in the property.

Beyond these basics, there are details for buyers and sellers to finalize, such as interest rates, amortization schedules, insurance notice requirements.  My experience in preparing, filing, cancelling, and litigating contracts for deed can help make your experience quite smooth and fast.  If you have questions on whether this type of transaction makes sense in your situation, I am here to help.

The material contained herein is provided for informational purposes only and is not legal advice, nor is it a substitute for obtaining legal advice from an attorney. Each situation is unique, and you should not act or rely on any information contained herein without seeking the advice of an experienced attorney.


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