The real estate agent you choose will both find you a house and help you negotiate terms with a seller. Because of that, it is important that the real estate agent realizes your situation and understands that you want to purchase a home through a land contract. You should disclose this fact at the beginning of your search.
There are not many agents that work with contract for deeds or know how to deal with them.
Contact BoardWalk Premier Realty INC Owner financing specialists.
Make a good offer. For a seller to take an interest in a contract for deed -you will need to offer good terms. homes sold on contract for deed sell for more than their normal rate.
Usually 5-6% That means you will want to put in a higher offer than you otherwise would. You might want to offer the full listing price, possibly more, depending upon the local housing market.
In Minnesota the housing market is really hot and not alot of homes for sale contract for deed. There are around a 100 homes contract for deed. That is less than years in the past.
Their is a shortage on homes in todays real estate market so you will want to act very fast if you find a contract for deed home you like.
I would recommend the same day you look at it you chances are you will be in a multiple offer situation and the sellers will most likely want to cash out and take a different offer.
◦ Houses sold on land contract typically go for a higher price than they otherwise would. Selling a house through a land contract is a good way to get back the full value of a house.
◦ The seller effectively becomes an interest-earning lender. Typically the rate of interest on a land contract is very high.
◦ Because the seller does not get all of their money at one time, they can also spread out the payment of the taxes due from the sale over a period of years.
◦ The seller obtains a regular flow of cash, without the pain of renting. Typically they will not be required to maintain the home in the same way that they would for a renter, but get the benefit of a steady stream of income.
The buyer agrees to directly pay the seller in monthly installments. The buyer is able to occupy the home after the closing of the sale, but the seller still retains legal title to the property. Actual ownership passes to the buyer only after the final payment is made /refinanced or paid off contract.
As in a standard mortgage, a contract for deed typically has an agreed-upon price and payment schedule. But the payments are often not amortized evenly over a long period, meaning you will likely be required to make a large lump-sum “balloon payment” at a specific date which is usually 3-5 years to complete the purchase by covering the full balance due on the sale price.
At that time, you will probably need to get a mortgage for the balloon payment or you may sell the property and keep the equity in the house.
I recommend planning a year a head just in case you have something that comes up and you cant refinance it. Talk to the seller and see if they will extend the contract or the buyer may sell the property.
Recording the contract for deed
Within four months of signing the contract for deed, you must “record” it with the office of the county recorder or registrar of titles in the county in which the property is located. If you do not do so, you could face a fine.
Recording the contract will also help prove your possession of the property and protect you from post-contract encumbrances placed on the property by the seller.
I recommend using a title company or law office they will record the deed for the buyer also do a title search to make sure the property is free of liens.
Generally the IRS will consider a contract for deed to be a sale, which means the buyer can deduct the interest payments the same as if they had a mortgage payment.
Buyers have the full ownership rights to the property, the buyer is still required to maintain the property, pay taxes.
Benefits of a contract for deed In Minnesota
Easy qualifying –
Quick closing. No delays from the lenders-Mortgage companies
Owners who sell their homes on a CD understand that a buyer is unlikely to have perfect credit and stable income.
Contract for deed payments are structured similar to a mortgage. The buyer pays the Owner their monthly payment the principal amount gradually decreases over time.
No lender fees -Huge savings..
Right to improve the property and build equity
Improve credit so the buyer can get a mortgage and refinance the home. Goto credit karma.com for free credit information