I am purchasing a home that is owner financed, It is on a Contract for Deed and we have lived there almost 11 months and the Contract for Deed has not been filed through the County we live in.

This has caused some concern; I was turned down for help from Fema during Ike due to the fact they consider me a renter and the damage was not major according to there standards. Also, when I pay the property taxes this year, will I be able to claim home owner discounts on Income taxes when filed? :confused:

It is very common for Contracts for Deed to NOT be recorded. It is one of the many, many reasons they are becoming more and more controversial and many states have all but outlawed them. What state are you in? I don't suppose you had an attorney review everything before you entered into the agreement? It may be worth your while to have someone look it all over now to make sure that it's structured in a way that complies with your state laws.

As far as the property taxes... you should be able to claim them on your taxes because you have the contract as proof that you are, in deed, buying the house and proof of your payments, but double check with your tax advisor just to be sure.

The best thing I can recommend to you at this point is to try to get in a position to obtain conventional financing ASAP and pay off the seller.

Contract for Deeds offer an option to people who can't qualify for financing to buy a home. That's basically the upside for the buyer. Pretty much everything else about it is geared in favor of the seller. In fact many (not all) real estate investors sell properties this way in the hopes that the buyer will default so they can get the property back after having collected a down payment. Then they can turn around and do the same thing again. Over and over again, in fact.

Does your contract require that you pay the taxes? Since you do not own the hoime (yet), then you are paying taxes for the owner. This may be considered part of your rental and you may not be able to get home owner credits since you do not (yet) own the home.

Yes, my contract does require me to pay the taxes on the property. I am in the state of Texas. No unfortunately I did not consult an attorney or a real estate expert. This was my very first home and I think I was just to darned excited... I know that I can't even file homestead on this property until it is filed with the state. Any Ideas?? :eek:

You can't force the seller to file. You need to read your contract carefully. Even though it may require you to pay the taxes, you are paying them on behalf of the owner. You DO NOT own the property. The contract probably states that you will get the deed when, and only when, you satisfy the terms of the contract.

Yes, thank you for your help... I will consult the tax office though. They suggest when I filed for the homestead that the owners are required to file with Austin? I will check on that further; appreciate both Scottgem and Rockinmommy for your responses.

I think you may have misunderstood, They may have said that for you to get the homestead designation the owners would have to file. Not that they had to file as a matter of law.

Yea your probably right. They also said if they didn't file through Austin - then I would at least need a notorized copy with the homestead form. Maybe that's all I need to do.

Ok, I'm in Texas.

About 3 years ago Texas passed some very restrictive laws governing Contracts for Deed. They are so restrictive that many of the investors I know (who did a ton of them) have just completely stopped doing them. If they do one little thing wrong now they basically wind up losing the property.

Check out this link: http://recenter.tamu.edu/pdf/1754.pdf

I'm not suggestion you "go after" the seller with both guns blazing or anything. But there are obviously a lot of rules they are supposed to be following.

After you see what the law is, if you still have questions or feel like something's not quite right I would consider at least having an attorney look over your contract and make sure everything is "above board".

Are you close to being able to obtain a conventional loan and pay off the seller?

No I have only live there for 11 months and it is a 15 year contract... I will definitely check out the web and consult an Attorney. Thanks for your help.

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Originally Posted by pamela56

No I have only live there for 11 months and it is a 15 year contract.... I will definitely check out the web and consult an Attorney. Thanks for your help.

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That doesn't mean that you have to pay out the whole 15 years. You can get a loan at any time and pay him off. I believe the new laws I directed you to also restricted pre-payment penalties and stuff like that.

I assume you did this in the first place because you couldn't get conventional financing? Are you working at building your credit, etc?