Are Contract for Deed Defaults on the Rise?

Are Contract for Deed Defaults on the Rise?

As most real estate agents know, the popularity of Contract for Deed dwelling sales has risen over the past several years, fueled by a lack of mortgage availability resulting from tightened loan qualifying standards.  The Minneapolis Star Tribune reports that Contract for Deed sales in Hennepin and Ramsey Counties rose 56 per cent between 2007 and 2012.

While most think of Contract for Deed sales as a risk for buyers, sellers are at risk as well.

In the past month, we've become aware of two consumer complaints about Contract for Deed transactions, both situations where the buyer has stopped making payments within months of the closing.  In both instances, the buyer has found it impossible to make payment. Some sellers are calling a real estate agent or broker for advice.

Contract for Deed sales are far less strictly regulated than mortgages, and some sellers have used the Contract for Deed to sell homes at inflated prices.  Many contract sales take place without the involvement of a real estate licensee.

However, not all Contract for Deed sales involve above-market sale prices and many are agent-assisted sales.  Durng the market slowdown, sellers who found themselves unable to sell a home felt forced to accept a Contract for Deed offer, rather than see their home remain unsold on the market month after month. 

Call your attorney if you are experiencing difficulty with a Contract for Deed transaction, whether you are the buyer or the seller.

The Contract for Deed holder in Minnesota has the option of serving the defaulting buyer with a "Notice of Cancellation of Contract for Deed" (Minnesota Conveyancing Form 30.4.1).  The form is widely available on various websites.  We recommend that any seller or buyer experiencing difficulties with a Contract for Deed transaction should contact an attorney immediately, before legal proceedings become necessary.