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Are you rebuilding your credit history? Having trouble securing a loan? A Contract for Deed may be the solution to help you buy your dream home. If you find a willing seller, a Contract for Deed can help you build credit while working towards the purchase of a new home.
Use a Contract for Deed if:
A Purchase Agreement has been signed by the Buyer and Seller of real property who are ready to proceed with finalizing the transaction.
You are selling real property to a Buyer who is unable to obtain financing through a bank or other financial institution and you have decided to act as the financer.
You are buying real property from a Seller who is willing to allow you to reside on the property while you make payments toward to total purchase price.
You are a Buyer who has no established credit or bad credit and wish to purchase a home by making payments on the sales price to the Seller without financing with a bank or other financial institution.
You want to determine the amount of a monthly payment on a loan contract.
Land Contract, Land Sale Contract, Contract to Buy (or Sell, or Purchase) Real Property, Contract to Buy (or Sell, or Purchase) Real Estate, Real Property (Purchase/Sale) Agreement, Deed Purchase/Sale Agreement
Contract for Deed Basics:
Purchasing a new home can be a challenge in any economy. A Contract for Deed can assist you in buying a home when other types of financing aren't available. By using a Contract for Deed, you can build your credit and take up residence in your new home by financing the sale through the seller.
A Contract for Deed is used when a seller acts as the bank for the sale of their property to you. The seller finances the sale and you take up residence while making payments to the seller. It is important to know that the document name, Contract for Deed, is a bit misleading; it's not a deed at all. A seller retains the deed and ownership of the property until you pay off the full purchase price of the property, plus interest on the loan. A Contract for Deed is also known as a Contract for Sale, Land Sale Contract or Installment Contract.
Information needed for creating a Contract for Deed:
You'll need to have some information at the ready to create your Contract for Deed but most of it you probably know off hand. We'll guide you through the process with our step-by-step process so all you'll have to do is answer a few simple questions. Here are some of the key provisions in a Contract for Deed:
Property address and legal description of property being sold. Legal description can be found on Seller’s title or Deed or may be obtained from office where property taxes are paid in the city, county or parish where property is located.
Type of property. For example, residential real estate or commercial property, etc.
The agreement effective date. This is the date on which the agreement will start.
Names and addresses of parties to the agreement. This includes the Buyer and Seller of the property. The Seller’s name must be as it appears on the current deed or property tax statement.
County and State where each party will sign the Contract. This may be different for Buyer and Seller. If the state is different, parties must choose which state’s laws will be applied to the Contract.
Specify person and address where payments will be made. Typically, this is the Seller.
Specify purchase price for sale of the property. Include amount of earnest or down payment; interest rate and beginning date interest will be charged.
Specify payment terms. For example, installments of principal and interest, installments for interest only, one lump sum payment or due on demand. For installment sales, include the number of payments, frequency of payments (i.e., monthly) and balloon payment amount.b
If Seller has existing loans, mortgages or promissory note with property used as collateral disclose name and address of creditor and amount of total debt.
Specify party who has possession and full use of property until contract paid off. Typically, this is the Buyer.
Whether or not Seller has agreed to perform specific repairs on property or sell “as is”. If Seller is required to repair, specify type of repair (i.e., fix back door lock) and number of days Seller has to complete repairs after signing date of contract.
Specify which party is responsible for maintaining insurance. This includes insurance on the property (i.e., homeowners or fire or flood insurance) and insurance on the personal property on the premises (this is typically the Buyer).
Specify which party will pay real estate taxes and assessments during contract period, as well as who is entitled to claim the property for tax purposes.
Specify who is preparing the Contract for Deed. In other words, specify who is completing the interview. This is required.
Other real estate documents and deeds:
If you're creating a Contract for Deed, you may find yourself needing one of the following:
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Copyright 2015 Rocket Lawyer Incorporated. Rocket Lawyer provides information and software only. Rocket Lawyer is not a "lawyer referral service" and does not provide legal advice or participate in any legal representation. Rocket Lawyer is not a law firm or a substitute for an attorney or law firm. For legal advice, please contact an attorney. Use of RocketLawyer.com and RocketLawyer On Call® is subject to our Terms and Conditions and the On Call Terms of Service.
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