One of the biggest questions is what is a Contract for deed?
A Minnesota Contract for Deed is used as a financing tool that can allow buyers who don’t qualify for traditional lending options to purchase a property faster and not go thru a Bank our mortgage lender.
2. How Can I buy a home contract for deed?
Contact Steve Vennemann with BoardWalk Premier Realty. 20+ years of real estate experience in land contracts-purchase agreements.
3. Do I need good credit?
No. Sellers usually want 10-20% down of the sale price of the house to enter into a contract for deed.
4. How much do I need to put down to finance a home contract for deed?
10-20% of the sale price.
5. How long before I have to refinance the property?
Usually the seller will finance the property for 3-5 years. Investors will carry the contract for a little longer 7 years.
6. Can I buy investment properties contract for deed?
Yes. Some times the seller/Owner may want more money down being the buyer is not occupying the property.
7. Can I buy a lake home or cabin contract for deed?
Yes same situation 10-20% down
8. Is rent to own the same as contract for deed?
Renting to own usually means renting now, with an option to buy later. When you make this kind of deal, you are still a tenant, and the seller is still a landlord, until the final purchase.
A contract for deed is very different. As soon as you sign the contract, you are the homeowner in every way, except you don’t have the title yet. You are responsible for repair and maintenance, and usually for the taxes and insurance.
9. Who do I call to find a home to purchase on a contract for deed?
BoardWalk Premier Realty.
10. Can I sell my property contract for deed?
Yes -Some lenders may have a due on sale clause.
11. How do I find a Realtor?
Call Steve Vennemann 651-334-8312
12. I hear about Investors who will buy a home and sell it back to me . I can choose any home of buy choice?
We Do have investors that will buy and sell a home back the to buyer. The catch is there is an uncharge of usually 10-20% of what the purchase price is . They also want 15-20% down in most cases. If you can get a deal on a home or really love 1 certain home this may be an option for you.
If you like this option feel free to search any home and property for sale in Minnesota . http://boardwalkpremierrealty.com
You can search the northstarmls for virtually every type of housing available.
13. How does a Contract For Deed Work?
Under a Contract for Deed, the buyer makes regular monthly payments to the seller until the amount owed is paid in full or the buyer finds another means to pay off the balance. The seller retains legal title to the property until the balance is paid; the buyer gets legal title to the property once the final payment is made.
If the buyer defaults on the payments, the seller can repossess the property. In Minnesota that can be 60 days from default.
The average length of a Contract for Deed is three to five years, but it can be for any amount of time that the buyer and seller agree on. Interest rates on a Contract for Deed are what the buyer and seller can agree on. Check usury rates. Similarly, the payments can be structured in any fashion that is agreeable to both parties. In some cases, the value of the house may be divided into equal payments so that the full balance is paid off by the end of the term. The length can be 10-30 years+.
In others, regular payments are set up with the balance coming due in a balloon payment at the end of the term. These contracts can be renegotiated so long as both parties are willing.
- VERY IMPORTANT TO HAVE A KNOWLEDGABLE REALTOR OR LAWYER DRAFT YOUR PURCHASE AGREEMENT. NOT ALL REALTORS ARE THE SAME.
- Beware! Contracts can hide numbers that can hurt you! There could be a balloon payment that is called something else in the fine print or not mentioned at all but hidden in the numbers. Read the terms carefully and use a calculator or an online “amortization calculator” to do the math.When you buy a house on a contract for deed, you don’t get the title to the house (the deed) until the final payment is made!
If you don’t make all of your payments, including the balloon payment, you will lose the house. The payments you already made are wasted and kept by the seller. You also lose the value of any repairs and improvements you made to the home.
If you do not make your payments, or if you violate the contract in any way, it can be canceled in 60 days. A violation could be something like not making a property tax payment.
60 days is much faster than the foreclosure process with a mortgage. If you don’t catch up on payments in those 60 days, the contract is cancelled, and you can be evicted.
If you can’t catch up on the payments, you should move out of the house before the 60 days are up, so you don’t get an eviction on your record. Having an eviction on your record can make finding a place to rent very hard.
4. GET A HOME INSPECTION:
Before signing any agreement to buy, ask the seller for an inspection report, sometimes called a “Truth in Sale of Housing Report.” This report is from an independent inspector about the condition of the house. It is required in Minneapolis and St. Paul and some other cities. This type of inspection does not show all types of problems that a house may have. Consider getting your own expert to inspect the house.
If you miss a payment, make sure the seller follows state law.
The seller must serve you with a notice of cancellation of your contract for deed to end the deal. If you get this notice, you have the right to pay the amount of money needed to catch up, plus additional costs. The notice should list the additional costs for you. If you get the notice, you can’t also be sued by the seller for payments you missed. If the seller tries to evict you without going through the cancellation process, call a lawyer right away.
Do not agree to sign a deed back to the seller at the same time you sign the contract. Do not agree to sign a deed back to the seller at any time. Some sellers ask buyers to sign deeds so they can avoid the legal cancellation process. A deed to the seller does not help you in any way.
6. COSTS OF OWNING A HOME.
Repairs: If you sign a contract for deed, you are in charge of repairs and keeping up the home. To protect yourself, know the condition of the home you buy. It will probably cost you a lot of money to keep it up.
For example, you can be fined by the city if your house needs to be painted or needs other repairs. If the furnace breaks, you have to fix it. If you don’t make the repairs, the house could be condemned, or the seller could cancel your contract. Either way, you would have to move out. You lose all the money you paid so far.
Property Taxes: Find out about the property taxes. If your primary residence is the home you own, you may qualify for cheaper property taxes. Apply for a “homestead” tax rate at your county’s property tax department.
Make sure the contract for deed states if property taxes and hazard insurance are included in your monthly payments or whether you need to pay them in addition to your monthly payments.
CAN I PAY OFF THE CONTRACT FOR DEED EARLY?
Make sure your contract for deed does not say that there is a penalty for paying off the contract early. Minnesota has a prepayment law” Seek legal advice on this“Pre-payment is good because it lets you try to get a traditional mortgage and pay off the contract at any time. A contract for deed can be a bridge to home ownership, if the contract is fair. Use the time to work on repairing your credit so that you can qualify for a mortgage and pay off the contract for deed.
Note: the seller does not have to report your contract payments to credit bureaus, so on time payments are not improving your credit. Sometimes you can add required credit reporting into your contract.
Make sure the seller owns the property.
How do you do this? The buyer should use a title company when purchasing the house they will do the checking for the buyer to make sure the title is clean of any defects. A law office will do this as well.
The buyer could also go to the county the property is located and check with the county recorders office.