Profile picture for LB3333

Are "contract for deeds" safe?

Why would a seller list their house as a contract for deed (other than capital gains issues), and why would a buyer want to buy one?  Aren't these types of transactions risky for BOTH parties involved?  Also, when I mentioned a Contract for Deed listing to my mortgage broker, he had never heard of them.  So, do I run away from my mortgage broker, or run away from this type of real estate listing?
  • July 21 2010 - Pinehurst
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Answers (4)

Profile picture for ABBAUSA
Land Contracts and Contracts for Deed are very risky for the buyer. The buyer is completely dependent upon the seller to deliver a deed when the contract terms have been completed.  This type of arrangement was addressed in Texas several years back. Not such a good way to go for the seller any longer. Contact a lawyer before doing anything like this in Texas.
The caveat is if the seller wants to foreclosure, he must go to court, this is a judicial foreclosure and very costly.

Good Luck!

James Callas - Realtor®
  • July 21 2010
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To add the the previous responses:  Think of a Land Contract as similar to buying a car.  You make payments, you 'own' the car (kinda), but the Seller still retains title (until all payments are made).

Your mortgage lender has never heard of this because it is not a standard or typical scenario.  Additionally, it is very unlikely that most FHA and conventional loan products will fund land contracts.  So, it is not a part of his or her arsenal.  Further, this is really a form of Seller financing.

Land contracts are typically cash deals, and rightly so, since you are pretty much 'renting'.  However, at the end of the loan period (balloon), you would have to 'refi' into a more conventional loan product.

Never, ever do a land contract without the assistance of a competent attorney.  And I am not just talking about a real estate attorney whose main practice is closings.  Make sure they have experience in land contracts and seller financing.

Good luck!
  • July 21 2010
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"Contract for deed" is basically a payment plan. In my view good for the seller not so good for the buyer.

See:
http://en.wikipedia.org/wiki/Land_contract

Ask a real estate lawyer if this is good for you.
  • July 21 2010
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Read the following:
http://en.wikipedia.org/wiki/Land_contract
  • July 21 2010
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