Minnesota contract-for-deed (CD), also known as owner financing, is promising home seller's and homebuyer's solutions to todays tough housing and lending market. Home seller’s are faced with lowering home prices and stiff competition due to the large inventory of homes. While many homebuyer’s want to take advantage of the housing market, but find it hard to get a mortgage due to stricter conventional qualifying guidelines. By purchasing a CD, buyer's can often achieve their saving goals and improve their credit.
In traditional real estate lending, many home seller’s have no choice but to drop their list price or take their home off the market if they can't find a buyer. For home seller’s who need to sell, but don’t need the immediate proceeds from the sale, seller financing can be a solution. Contract-for-deed’s offer seller’s the ability to spread the gain from the sale over years to defer tax liability and any income generated from the sale can provide a monetary resource for retirement or other life needs and changes.
Homebuyers' seeking the benefits of homeownership, but can't qualify for traditional financing find owner financed properties appealing. Especially CD's that offer simple fixed rate terms. Owner financing can help both sides of the residential real estate housing market. To avoid potential problems, a professional real estate finance and negotiation expert can help each party understand the contract-for-deed process, risks, and benefits. Neither party should ignore, or bypass the steps necessary to make owner financing work properly for a win/win situation.
One of the biggest challenges facing seller financing is structuring the sale. What is the "right" structure for the sale? Each transaction is different, but the principles are the same. Seller provides financing to purchase the home for an agreed-upon purchase price and the homebuyer repays the loan in monthly installment payments. Seller often requires a down payment. The seller retains the legal title to the home while allowing buyer to take possession, but not legal ownership. The sale price is typically paid in monthly payments over a period of 2 years or more. End of contract includes a balloon payment to complete the contract and transfer title to homebuyer.
During a CD closing transaction, the Seller Financing Disclosure Notice of Financing Terms and Contract for Deed serves as a notice to the buyer the purchase price, how payments are made, and how interest is set. Fees related to insurance and taxes can be set in the direction of the Seller or the Buyer at their option before the signing of the agreement. The contract includes the terms of property transfer between Purchaser and Seller. The document is completed by the Seller and provided to the Buyer before signing of the contract for deed.
The Real Estate Disclosure form is used to disclose the property conditions. The form describes conditions as they exist at the time of the contract signing.
In traditional lending a number of state and federal legal requirements are preformed. Each state has its own finance laws and legalities. The Real Estate Settlement Practice Act (RESPA) was enacted in 1974 by Congress to address growing homebuyer concerns over proper disclosures of settlement costs. The Department of Housing and Urban Development (HUD) enforces the the law. The Truth in Lending Law (TILA) was designed by the Fedreal Reserve to inform consumers about the use of credit by requiring disclosure of the credit terms and costs.
Sellers and buyer's considering owner financing should learn more about them from local professionals who understand contract for deed financing, negotiations, and contracts. A seller can reap the rewards of selling their home. Buyer's build their credit while preparing for the final payment. The contract for deed can help buyer's put challenged credit back in good standing making them ready for a mortgage at time of title transfer.
My job does not end at facilitating fair transactions that builds value for both sellers and buyers. I help buyer's get ready for their new financing too. Home buyer's are not alone after the closing!
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