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Contract for deed option in Andover and Oak Grove

By Joel Friday

Real Estate Agent with Keller Williams Classic Realty 20538434

September 29, 2014 07:38 AM

Real estate market data in Andover MN by Joel Friday of Keller Williams Classic Realty

Ever wonder what Contract for deed is all about? Is it good for the buyers or sellers? Here are the basics in a nutshell.

Contract for deed is simply seller financing. No mortgage applications, mortgages, PMI, loan originations fees, etc... (some companies are offering CD terms and adding these things back now, but they are doing a buy sell of a specific home for a specific buyer). The seller is now the bank. You make your payments to the seller directly. Once you pay off the contract, they provide you with the deed.

Typical terms and Conditions

The seller will only want to hold the contract for 3-5 years, after the term, the buyer will need to obtain conventional financing to pay off remaiining balance. This is referred to as a balloon payment. The interest rate will be 2-3 points above going mortgage rates and are limited in Minnesota by the Department of Commerce. Sellers will also want a 10-20% down payment.

Why would a buyer do this?

Buyers whose credit may be low yet have solid income and a decent down payment. This allows the buyer to lock into today's prices and start to build equity instead of building their landlords equity. We have helped others who have inheritance's or other large sums of money coming in 1-3 years as well.

Why would a seller do this?

Sellers are able to produce additional buyers for their home which can help them obtain a better price for their home than traditional buyers alone. No appraisal is needed in this case. Earning interest can offset equity losses that may have occurred. Property condition does not need to meet anyone's standard except the buyer. In one case we were able to obtain a better price and give the buyer a lower monthly payment.

How can that be?

The payment is normally done on a 30 year amortization, just like a traditional mortgage. You can however be flexible and go interest only or a longer amortization schedule. The example above, the buyers had large disbursements comig over the next few years and used that to build their equity while maintaing the lower monthly payments.

What sellers are offering a Contract for deed?

19510 Blackfoot St NW Oak Grove, MN 55303 5 private acres on the Rum River

and

2339 145th Ave NW Anodover MN 55304 1 acre with main floor master suite backing up to Coon Creek

Keller mobile search app for Andover MN 55304

Main floor master suite on Coon Creek in Andover MN Click Here MN 55304
Spacious split near Andover Schools in Andover MN Click Here MN 55304
Median sale price in Andover MN 55304

Andover homes for sale	by Keller Williams Classic
Under 150,000 150,000 - 300,000 300,000 - 450,000 450,000 - 600,000	600,000 - 800,000 800,000 - 1,000,000 1,000,000 - 1,500,000 1,500,000 +