Contract for deeds vs notes

[Chris Seveney]

Curious as to others opinions on contract for deeds vs notes.

I invest in both and hear are some of my thoughts:

CFD's

Positives -

when occupied tend to have higher reinstatement percentages

Payments typically cheaper than rent

Higher interest rates on loans

Most states borrower defaults property reverts back to lender

Most states forfeiture vs foreclosure which is quicker and less costly

Cons

Lower quality borrower

Homes typically in poor condition (don’t trust bpo)

Title issues

Lower monthly payment streams

Notes:

Pros

Borrower qualified at origination

Title insurance most cases

Higher resale value

Homes usually better condition

Cons

Foreclosure timeline and cost

If house has equity goes to borrower

Higher chance borrower file BK

More sophisticated borrower

Thoughts from others?

[Don Konipol]

@Chris Seveney

Back to your original question. You thoroughly and accurately covered the positive and negatives of each vis a vi the other.

The only thing I will add is that some states have specific laws relating to CDs. For example, in Texas, a CD on a residential property it is required that the seller transfer title via warranty deed when the borrower/buyer has obtained 20% equity in the property.