[mariemay]

I'm considering purchasing investment properties through contracts for deed instead of getting financing through banks. I'm trying to figure out the pros and cons. I was concerned about getting a contract, then the owner taking out a second mortgage that perhaps they cannot payoff once I have fulfulled the contract. I live in Arkansas and I don't know the laws on it here yet. I'll take any comments on the topic.

[rockinmommy]

That's a legitimate concern. There are a lot of legitimate concerns about doing a contract for deed as the buyer. I'm not personally familiar with the laws on it in Arkansas in particular, but I know that a lot of states have made it all but illegal because the structure of these transactions is so heavily tilted in favor of the seller.

In fact, many - maybe even most - investors who sell properties this way are banking on the fact that you'll default so that they can get the property back, keep your down payment money, and do the same thing all over again... and again and again.

You're absolutely doing the right thing to get as educated on the process and laws as possible. I'd just search "arkansas contract for deed" and I bet you'll get a whole ton of hits.

If you decide that you want to go ahead with purchasing a property this way start shopping around. When you find a property that you think you want to put under contract I think it would be WELL worth your money to have your own, independent attorney look over all of the paperwork, and add their own clauses, if necessary. Don't just rely on the seller and his/her attorney. It should cost you around $300 or less to have an attorney review a purchase for you.

[Fr_Chuck]

This is a issue and does happen, You will want to file the contract at the office of deeds so that it will be recorded.

I have bought dozens this way, but only when I planned on flipping them within a year.