[Kep]

Dear folks:
I've been crawling through the site, and I wish I'd found you guys when I BOUGHT my house! Ah well... I have an offer on the sale though, please help.

Forgive me for beating a horse that might already be dead, but I have an offer on my house with C2D and I have NO IDEA what I need to do other than contact an attorney (first thing in the morning!).

Meanwhile, is this a worth while deal? What questions should I be asking of the seller? Should I have biother talking to my Real Estate agent who I think s more interested in this deal than he should be?

The particulars:

House is in Minnesota
Offer:
$150k
25k Down
$690 a month (my nut is $1140 with insurance et al)
Contract for 2 years.

This is all I know right now (the agent just called). I'm waiting to hear more and ask more. Please advise! PLEASE!

AEIOU,
Kep!

[Fr_Chuck]

On a contract for deed you do not transfer any ownership to them until the contact is paid in full

I would guess that about 90 percent never get paid off and you will take the house back, This is how I sell almost all of my houses I sell.

I make my money on the large down payment ( instead of a rental deposit I may have to return)

I do mine either for a few years with a ballown at the end, or I do it for 15 years at a high percentage rate.

The 690 is not right for a balance of 125 K you need to work it out on maybe 7 to 10 percent for 20 to 30 years and add property tax and insurance. That will be your monthly payment.

On the 2 year, what they are expecting is to actually either resale it ( their right for more money) basically a flip with your finacing the deal, or they have poor credit now and hope in 2 years they will have better.

So in two years when they can't get a new loan and want you to hold the note longer what are you going to do. In business you say no, evict them and resale the house

This is a deal done normally with someone with such bad credit they can not borrow money somewhere else. ( and people with bad credit can get loans unless it is really really bad credit.

Just my opinion from buying and selling many of a house this way.

If you decide to do it, you hire your own attorney to write it up, don't use off the shelf forms and never let them write it up.
And it has to say what you can do if they fail to pay, and payments for late charges and eviction procedures

[Dr D]

Adding to what Fr Chuck has already stated; your mention of an $1140 Nut indicates that you have a mortgage on the property that you are paying on. If you review your Deed of Trust or Realty Mortgage instrument, you will most likely find a specific prohibition against transferring any interest in the property without paying off the loan first. This is called a Due on Sale Clause. A Contract For Deed is most used for the sale of a property that is free and clear, or has an old mortgage without that clause.

[Fr_Chuck]

In general since a contract for deed is not normally filed at the court house, many still use it, since the people paying are not building up any true equity or interest in the home. Unless they completely finish the contract, the money they pay have never added to any claim on the home.

** which is why I love them and you don't have to foreclose, only evict like a rental, since the contract changes to a rental once they default
(make sure that is included)
So it is argued by many that a contract for deed does not actually put a interest on the property

But this is a risk to the person getting the contract, since if the owner does not pay his mortgage and it is foreclosed on, he can lose his contract since it has no bearing on the foreclosure.

So I actually won't buy one on contract that has a lien and want a clause that the owner is not allowed to put a loan on the property.
Since I have a cash flow but not a lot of captitol, if I have a house I want to fip very quickly I can find a house in an estate, get a contract on it, fix it up and then by closing my contract at the closing of my sale, it transfers the house from that owner to my buyer and I just keep the cash difference

[ScottGem]

Some other things to add here. Even though the $690/mth is less then what you pay per month, if you just put the $25K away, and pay the difference ($450/mth) from that, you still come out ahead and that doesn't count interest on the $25K. After the 2 years you should still have between $14K & $15K left.

One thing that needs to be spelled out more, is what they owe after the 2 years. The purchase price is $150K, leaving $125K left after the down pmt. Not figuring in Interest, that leaves $108,440. That wouldn't be such a great deal. Essentially it means you only get a total of less than $125K from wich you have to pay off your mortgage balance.

You are also taking a risk if the buyers don't take care of the property. You will then need spend money fixing it back up to resell.

I would hold out for a higher monthly payment and higher payoff after the 2 years.