will do thanks
glad i read this
Because of recent credit tightening, some home buyers may be less likely to qualify for mortgages than they were just a few years ago. Some financial counselors predict that borrowers with limited options may turn to alternative means of purchasing a home. One such alternative is the contract for deed.
In a contract for deed, the purchase of property is financed by the seller rather than a third-party lender such as a commercial bank or credit union. The arrangement can benefit buyers and sellers by extending credit to home buyers who would not otherwise qualify for a loan. Indeed, public and nonprofit housing advocacy organizations have used the contract for deed as a tool to help low- and moderate-income households attain home ownership.
Nonetheless, this alternative financing mechanism lacks many of the protections afforded borrowers who have traditional mortgages. In addition, these contracts may contain provisions that leave room for abuse and can pose risks and uncertainties for both the buyer and seller. The following article presents basic facts and features of the contract for deed and offers suggestions for minimizing the risks associated with this mortgage substitute.A contract for deed, also known as a "bond for deed," "land contract," or "installment land contract," is a transaction in which the seller finances the sale of his or her own property. In a contract for deed sale, the buyer agrees to pay the purchase price of the property in monthly installments. The buyer immediately takes possession of the property, often paying little or nothing down, while the seller retains the legal title to the property until the contract is fulfilled. The buyer has the right of occupancy and, in states like Minnesota, the right to claim a homestead property tax exemption. The buyer finances the purchase with assistance from the seller, who retains a security in the property.
The contract for deed is a much faster and less costly transaction to execute than a traditional, purchase-money mortgage. In a typical contract for deed, there are no origination fees, formal applications, or high closing and settlement costs. Another important feature of a contract for deed is that seizure of the property in the event of a default is generally faster and less expensive than seizure in the case of a traditional mortgage. If the buyer defaults on payments in a typical contract for deed, the seller may cancel the contract, resume possession of the property, and keep previous installments paid by the buyer as liquidated damages. Under these circumstances, the seller can reclaim the property without a foreclosure sale or judicial action. However, laws governing the contract-cancellation process differ from jurisdiction to jurisdiction and the outcome may vary within any one state, depending on the contract terms and the facts of the specific case.
Because the buyer in a contract for deed does not have the same safeguards as those afforded a mortgagor in a purchase-money mortgage, the contract for deed may appear to be essentially a rent-to-own arrangement. However, in a typical contract for deed, the buyer becomes responsible for the obligations of a mortgagor in possession, such as maintaining the property and paying property taxes and casualty insurance. In addition, unless prohibited by the contract, either party may sell his or her interest in the contract.Home buyers may be attracted to a contract for deed purchase for several reasons. This method may be especially appealing to home buyers who do not qualify for a mortgage, such as people who work cash jobs and are therefore unable to prove their ability to make payments. Since the contract for deed process is significantly shorter than the mortgage-approval process, it may attract buyers who face time constraints or have limited options, such as people who are losing their homes to foreclosure. First-time home buyers who lack experience in the market or individuals who are wary of traditional financial organizations may also choose a contract for deed because of the relative simplicity of the buying process.
Contracts for deed are a more popular financing alternative among minority home buyers, most notably Hispanics. According to figures from recent American Housing Surveys, while only 5 percent of all owner-occupied households in the U.S. had contracts for deed in 2005, 9.5 percent of Hispanic owner-occupied households and 7.1 percent of black owner-occupied households across the country used them.1 (For more figures on the use of contracts for deed, see the table below.) Though contracts for deed are sometimes referred to as the "poor man's mortgage,"2 American Housing Survey results indicate that only 3.9 percent of U.S. households below the poverty line used them in 2005.
However, it is difficult to know exactly how prevalent contracts for deed are, because the nature of these arrangements allows the buyer and seller a degree of anonymity. Despite laws in some states that require the buyers or sellers in all contracts for deed to record the sale in the office of the county recorder or registrar of titles within a specified time period, the sales often go unrecorded due to a lack of financial and legal sophistication on the part of both parties involved in the agreement.Before the rise of subprime lending in the 1990 s, many buyers who were unable to qualify for traditional financing resorted to contracts for deed. Indeed, for most of the last century, the contract for deed was frequently used as an alternative to a mortgage or deed trust. Today, routine use of contracts for deed persists in some parts of the country. For example, in west central Minnesota, anecdotal information suggests that contracts for deed are a commonly used alternative to mortgages.
Still, some financial counselors and property law scholars regard the contract for deed as a "legal dinosaur 3 or an "anomaly,"4 and even call for its demise. They assert that the contract for deed has no place in modern property financing, offers no real benefits over the mortgage, and leaves both parties vulnerable to risk and uncertainty.
One major objection to the contract for deed is that it is closely associated with a form of predatory lending that was prevalent from the late 1980s through the 1990s. During this period, some neighborhoods—including those in North Minneapolis—experienced a predatory lending scheme known as equity stripping. In an equity-stripping scheme, an investor finds a homeowner facing foreclosure and approaches him or her with an offer to buy the home. After purchasing the home, the investor pays off the debt, sells the home back to the original owner on a contract for deed, and gains the equity from the transaction. Fortunately, these equity-stripping scams have faded from the scene in recent years—largely because homeowners facing foreclosure today have little to no equity for unscrupulous investors to strip.
Another objection to contracts for deed, apart from their association with nefarious equity-stripping scams, is that they have a reputation for offering little legal protection to buyers. Despite gaining home repair and maintenance responsibilities, buyers have limited ownership rights and control over their properties while they make payments to sellers. Buyers gain no rights of redemption through the transaction.
Until several decades ago, U.S. courts routinely enforced the forfeiture clauses of contracts for deed in the event of the buyer's default. For example, if a home buyer missed a single payment 15 years into a 20-year contract for deed, the seller could cancel the contract and retain the title and all the previous payments, while the buyer would suffer a substantial loss. However, such extreme cases are less common today. While a few courts enforce forfeiture provisions as written, most have become more sympathetic to complaints brought by the defaulting buyer, especially in circumstances where the buyer has already paid a significant portion of the purchase price. Courts today often view the contract for deed as analogous to the mortgage and, consequently, extend mortgagor's protections to the buyer in cases of default.Despite favorable changes in the legal enforcement of forfeitures, contracts for deed pose distinct risks for buyers. One major risk stems from the short time period required to cancel the contract in the event of default. For example, in Minnesota, when a buyer falls behind on payments, the seller can file a Notice of Cancellation of Contract for Deed with the county and serve the buyer with the notice. The buyer has only 60 days from the date of the filing to address the items of default and pay the allowable attorney fees to "reinstate" the contract. This is a short time span in comparison to the six months or more afforded mortgagors who face foreclosure. As a result, a defaulting contract for deed buyer has a much narrower window of time to find a new home and is likely to have limited housing options.
Another major risk for the buyer is the balloon payment. Unlike most traditional mortgages, the majority of contracts for deed are not fully amortized. Instead, the contract is most frequently structured to require monthly payments for a few years, followed by a "balloon payment" that completes payment on the house. To make this balloon payment, the buyer will almost inevitably need to obtain a traditional mortgage. If a buyer is unable to qualify for a mortgage at the time the balloon payment is due, he or she is likely to face cancellation of the contract.
Some buyers enter into contracts for deed with the hope of repairing their credit. They expect to improve their credit profile during the first part of the contract period and then qualify for a loan at the time the balloon payment is due. However, according to Dan Williams of Lutheran Social Services in Duluth, Minn., a contract for deed often does not improve the credit of the buyer because individual sellers typically do not report to credit agencies. The buyer may attempt to use a letter from the seller stating that he or she makes the contract payments on time, but unfortunately, most lenders do not honor such a letter.
Williams warns that unexpected home repair costs may also pose a risk to buyers in a contract for deed. While this risk also applies to buyers who purchase homes through conventional mortgages, it may be greater in the case of homes purchased through contracts for deed, because a seller can execute a contract for deed with limited disclosure about the condition of the property. Minneapolis-based attorney Larry Wertheim explains that in a third-party financed sale, the lender's stringent requirements for title examination, title insurance, and appraisal provide the collateral advantage of disclosure for the buyer. Unless the buyer in a contract for deed has legal assistance or is aware of the need for appraisal and title examination, the transaction may not include these safeguards. In addition, since many homebuyers choose a contract for deed because their weak credit precludes them from obtaining a conventional mortgage, they are unlikely to qualify for loans to finance repairs. Ultimately, defects in the property could increase the chances of the buyer defaulting on payments and losing the home.
Another risk for contract for deed buyers stems from the fact that the seller retains the title to the property during the life of the contract. Since the seller retains the title, he or she may continue to encumber the property with mortgages and liens. The seller is only obligated to convey good title when the purchase price is fully paid and it is time to deliver the title. He or she does not need to have good title at the time the contract is executed nor during the life of the contract. Depending on state law and whether the contract is recorded in a timely manner, the buyer's interest may be junior in priority to these pre- and post-contract encumbrances placed on the property by the seller.
In addition to the problems described above, no two contracts for deed are alike and, according to Cheryl Peterson of Twin Cities Habitat for Humanity, the terms of the agreement are often unclear. The contract for deed is typically a one- to five-page document that includes the amount of the purchase, the interest rate, the monthly payment, and some verbiage regarding cancellation. The documents often do not include a standard arrangement for beginning the cancellation process. This lack of clarity in contracts for deed creates difficulties for financial counselors who give advice to buyers facing forfeiture. According to Peterson, "You can't say, 'If you've seen ten contracts for deed, you've seen them all.' It doesn't make you an expert, because the next ten will all be While a contract for deed may have its appeal as an alternative financing device, given the risks involved, buyers and sellers should proceed with caution when entering such an arrangement in the private market. The following advice from the Minnesota Legal Services Coalition stresses that both parties should make an effort to be fully informed.
Finally, according to Wertheim, once the contract for deed is executed, the buyer should record the contract immediately with the county recorder's office or the registrar of titles. While statutes requiring this registration are rarely enforced, recording the contract will help prove the buyer's possession of the property and protect him or her from post-contract encumbrances placed on the property by the seller.different."It is important to note that despite their risks and sometimes negative associations, contracts for deed are not intrinsically bad. When used wisely, they can be a good fit for some consumers. Contracts for deed offer a swift, streamlined option for people who do not qualify for traditional mortgages or would prefer not to deal with mortgage lenders. When administered by public agencies or nonprofit housing organizations, contracts for deed can be a tool for building credit, promoting home ownership, and stabilizing neighborhoods.
To protect their interests in contracts for deed, sellers and buyers must do their homework, so to speak, by making sure they learn and understand what specific provisions and risks the contracts entail. Buyers in private contracts for deed should take additional steps. These include assessing the condition of the property, confirming that the seller has clear title, and recording the signed contract at the appropriate government office. By being informed and prepared, the buyer and seller in a contract for deed can help ensure a positive outcome for both parties.
just a little research
Because of recent credit tightening, some home buyers may be less likely to qualify for mortgages than they were just a few years ago. Some financial counselors predict that borrowers with limited options may turn to alternative means of purchasing a home. One such alternative is the contract for deed.
In a contract for deed, the purchase of property is financed by the seller rather than a third-party lender such as a commercial bank or credit union. The arrangement can benefit buyers and sellers by extending credit to home buyers who would not otherwise qualify for a loan. Indeed, public and nonprofit housing advocacy organizations have used the contract for deed as a tool to help low- and moderate-income households attain home ownership.
Nonetheless, this alternative financing mechanism lacks many of the protections afforded borrowers who have traditional mortgages. In addition, these contracts may contain provisions that leave room for abuse and can pose risks and uncertainties for both the buyer and seller. The following article presents basic facts and features of the contract for deed and offers suggestions for minimizing the risks associated with this mortgage substitute.
"Before i did my own larger back yard i read this article found it for you again."
People are investing more in the back of their property, and the home-improvement boom is driving that engine. A study by the University of Michigan found that consumers value a landscaped home 11.3 percent higher than the same home without good landscaping.
But exactly which improvements pay off? And which ones waste your money? Here are Barbara’s picks:
Big backyard trendsLess lawnLow-maintenance vegetation saves on upkeep and time. Foot-friendly ground covers instead of turf grass compete with weeds. Deep planting beds and wide borders with low-care perennials and shrubs in the mix add interest.
More treesTrees are one of the few things that appreciate over time. Almost everything else depreciates the moment you install it. Experts say that younger is usually better when you’re planting trees, but if you’re selling within three to five years, you’ll need some size to get the full effect. The best size to buy is 8’ tall, 1-2” in diameter, sitting in a 15-gallon pot ($50-$150).
Outdoor roomsA dining area, dry laid patio, a patch of gravel, a covered patio or an above-grade deck: According to SmartMoney.com, a landscaped patio raises the value of your home by 12.4 percent. Today’s best-selling improvement is a backyard terrace that abuts the family room. It costs anywhere from $12 to $50 per foot, depending on how fancy you want to get. Consider an oversize sandbox as a play space for your kids. Cover it with bird netting rather than plastic sheeting to keep the critters away while letting sunlight naturally sanitize the sand.
Backyard sanctuariesThe key feature is water; either a fountain ($500-$1,500), a small pond (DIY for $200; professional job costs $2,000), or a hot tub ($1,000). It could even be as simple as a terra cotta pot with a recirculating pump from the hardware store ($50). The other key feature is a comfortable place to sit and relax.
Full outdoor kitchensFrom $15,000-$100,000, they include refrigerators, grills and sinks. The fancier the brand and the bigger the size make it today’s backyard status symbol.
A ‘year-round’ yardYour yard can look leafless and drab in the winter months, but flowering shrubs, colored bark, ornamental grasses and colored berries all add color in the cold seasons. According to SmartMoney.com, hedges alone raise property values by 3.6 percent.
Landscape lightingOften called "Malibu lighting,” it runs on solar power and is easy to install. It shows off your garden at night, silhouettes your trees, keeps everyone safe from tripping and keeps burglars away.
Smart backyard tips
Make a five-year planEverything doesn’t have to happen all at once. Plantings mature at different rates, and you can add new features each year.
Test your soilThe soil is just as important as what’s going into it. You can test your soil by contacting your county agricultural agency. They’ll send back the results with instructions on what you’ll need to add to improve it.
Hire a professional landscape designerThey charge $50-$75 an hour. You can pay them for the design only and do the installation yourself.
Don’t forget an irrigation systemIf you don’t have the time or interest in watering yourself, consider an irrigation system to keep the backyard looking good. It’s expensive — at least $3,000 — but potential buyers will love it.
What not to doThe truth is that some backyard projects scare off prospective buyers. Here are the splashy additions you shouldn’t do:
Swimming pool: Your home’s crown jewel is an eyesore in the winter, needs constant chlorine monitoring in the summer and usually needs to be closed in by a fence for safety. A typical pool costs $75,000 to install, but no buyer will pay your extra $75,000 when they buy your house.
The sport court: This multipurpose area for tennis matches and basketball is seen as a huge patch of asphalt where the beautiful yard should have been.
Fruit trees: Your fragrant orchard is a magnet for rotting fruit and the flies that feed on it, and calls for constant pruning.
Built-in fire pit: This barbecue haven for alpha males is seen as a stone monstrosity. A portable barbecue would be better.
A concrete patio: The broad expanse of concrete creates a parking-lot type of yard where rain collects in puddles.
I would suggest several reasons for non-attention. One is that, to a large extent, the fact that one-third of the nation still is ill-housed is a hidden problem. Lack of affordability - our number-one problem - and its broader implications on poor people's lives is not something the fortunate among us experience or even know about. Spatially, too, the rise of gated communities, sprawl and the extreme residential segregation by class and race keep those on top from knowing much about those on the bottom - a form of "American Apartheid," as Douglas Massey and Nancy Denton's 1993 study so aptly put it.
Race is its own barrier. The creation of a true Right to Housing bumps squarely against issues of location and access. Who is to live near whom, go to school with whom? Americans simply don't want to acknowledge the workings and vast impact of structural racism, let alone individual racist attitudes and behavior. How to deal with that confounds us. But unless and until we face that problem, it will inhibit serious movement toward providing all Americans - black, brown, yellow, white and all the skin color mixtures in between - with this basic need and right.
Cost is possibly another barrier. To provide every American household with decent, affordable housing, given the large and widening gap between incomes and housing costs, will require vastly more government subsidies than we now devote to housing - the exact amount of course depends on what kinds of programs, what systems of financing, ownership, development and management we choose (the more market-oriented, the larger the cost; the more we create a social housing sector, the smaller the cost), but think along the lines of $80-100 billion annually. Maybe it would be an easier sell if we make clear the costs of having one-third of a nation ill-housed - and explain how eliminating those costs greatly reduces the bill. And it may be an easier sell if we drive home the point that upper-income taxpayers already get subsidies of that order via the tax system. Not that the society can't afford this: look how easily we come up with similar amounts to bail out savings and loans, make war, give massive tax breaks to the wealthy. It's all a matter of political will.
So how do we get from here to there, how is that political will created?
No simple, quick answers here, but a few ending thoughts.
We need to make politicians and candidates - for local, state and federal offices - speak to the housing problem and commit to effective ameliorative programs. And that in turn requires grassroots pressure.
We need to emphasize housing's links to problems in the areas of health, education, income support, food, crime, employment, immigration, economic and community development. In doing so, we will create coalitions of social justice activists whose power will grow exponentially.
Selective litigation may help as well. There are examples of social justice gains via lawsuits in other areas - ending legally sanctioned segregation in public schools, abolishing the poll tax, requiring due process hearings before government aid is terminated, facilitating receipt of welfare support by eliminating barriers based on interstate movement. The housing area is ripe for similar approaches, building on similar legal theories and laws governing public benefits, child welfare, mental health and other programs.
We won't have a conservative/reactionary national administration forever, and the Congressional election results (in particular, having Maxine Waters as the incoming chair of the House subcommittee that deals with housing matters, Jack Reed or Chuck Schemer as her Senate counterpart) are a hopeful sign. It's time to think seriously about mounting a public and political campaign to make decent, affordable housing a right for all Americans.
Just a little research......
hey Joe your cool then you can or should base your decision on their financial track record and its negative.
i will as well
Here is the link for the back to back (double close) contract. It wouldn't let me attach it so I had to copy and paste it...sorry.
This is the contract you use between YOU and the OWNER of the house. You make an offer to the owner...when you both come to an agreement...you fill in the blanks on this contract. Get the parcel number of the house from the tax assessors office. Call them and give them the house address and they will give you the parcel number. Sometimes they have a web site containing this information.
OK...when you get the house under contract between you and the owner of the house...then you find your end buyer...of course you will quote him a higher price than what is on this contract. The higher price will cover your assignment fee....and you need to make sure Eric is covered if you are using him to fund your house. He can tell you exactly how much. You add your fee plus Erics fee and I always tack on a couple extra thousand for "just in case"...just incase you have to give the end buyer a little discount etc...
When you and the end buyer come to an agreement on a price then your get this same contract (a blank one) and refill out the information with YOU as the seller and your end buyer as the BUYER.
When you go to closing day the title company will first close between you the the owner using Erics funds...then the same day they will close between you and your end buyer
any time good luck