If you've been following my series on Contracts for Deed, you've seen quite a bit of information come your way. Here's a quick summary:
•· A contract for deed is another way of buying a house, but with the seller providing the financing for the buyer instead of a bank or other lender.
•· Because the seller is doing the financing, and because he probably doesn't want to be in that position, you will probably have to pay for the privilege of buying his house.
•· That means a higher price than you might otherwise pay, and a higher interest rate than banks are offering. Sometimes a significantly higher rate.
•· You may have your credit checked before the seller agrees to finance you.
•· You will also have to get the seller out of the deal when the balloon payment is due, or sometime before. You'll most likely do that by refinancing, but you could also do that by selling the house for enough to pay him off.
•· That's one of the main reasons to buy on a contract for deed: it is easier for someone who already owns a home to get it refinanced than it is for that person to get financing to buy the house in the first place.
•· The worst thing from the seller's point of view is to get his house back from you in terrible shape. In order to keep that from happening, you will need to provide a substantial down payment. Part of this will be to pay his Realtor's commission, if he used one, and the rest will be insurance: the more money you have in the deal, the less likely you are to either cut and run or let the house fall into disrepair.
•· You will be responsible for paying for repairs, insurance, taxes, etc. It is your house.
•· If you're thinking of entering a Contract for Deed as a buyer, you should have your attorney review the document. Better would be to have your attorney prepare the contract, but that may be problematic.
There you have it. I probably missed some important and obvious points, but at the moment they are not coming to mind.
Good luck with your new home!
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